Therefore, the February PMI indicates growth for the 81st consecutive month in the overall economy, while indicating contraction in the manufacturing sector.
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A reading above 50 indicates the sector is generally expanding, while a reading below that level indicates contraction. Though automobile sales slowed a bit in February, they remained at levels consistent with strong consumer spending.
Barclays: We look for the ISM manufacturing index to slip to 47.5 in the February reading, down from 48.2 in January.
Production increased in February at the fastest rate since last summer and inventories fell, a sign that companies have worked to prevent warehouses from piling up with unsold goods.
ISM’s Employment Index registered 48.5 percent in February, which is an increase of 2.6 percentage points when compared to the 45.9 percent reported for January, indicating contraction in employment for the third consecutive month, but at a slower rate of contraction than in January.
A petroleum and coal products respondent said that low oil prices and reduced activity continue to affect business, and a chemical products respondent said that US business demand is up solid, and global demand is soft. Ongoing efforts by businesses to sell unwanted inventory have also been a drag on factory activity.
A second manufacturing survey yesterday from data firm Markit also corroborated the improvement in factory activity in February.
Manufacturing accounts for roughly 12% of the country’s economic output. The dollar rose marginally against a basket of currencies.
Production rose despite export growth falling into negative territory.
According to World Bank data, manufacturing makes up about 12 percent of US gross domestic product, down from 16 percent at the turn of this century. “Now that we see new orders growing for two consecutive months that inventories number is very likely to start heading upwards as we go forward”. That followed an upwardly revised 0.6 per cent increase in December, previously reported as a 0.1 per cent gain. Of the 86 percent of respondents who reported their backlog of orders, 19 percent reported greater backlogs, 22 percent reported smaller backlogs, and 59 percent reported no change from January.
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In a separate report, the Commerce Department said construction spending increased 1.5 per cent to US$1.14 trillion (RM4.74 trillion), the highest level since October 2007, as both private and public outlays rose.
