The February 2010 Manufacturing ISM Report On Business® was released this morning. It indicated that the manufacturing sector was slightly less robust in February than January, with the PMI slipping from 58.4% to 56.5%. As 50 is still the demarcation between sector expansion and contraction, the data indicate that recovery continues apace in the manufacturing sector (for a look at manufacturing globally, see Edward Hugh’s comments here).
I wouldn’t make much of the small decline given the unseasonable weather in February. This was certainly responsible for much of the month-to-month variation. Noticeable, however, is the pickup in Employment, inventories and customer inventories. The data suggest the inventory cycle will continue to contribute positively to GDP and that employment may turn up sooner in manufacturing than elsewhere in the U.S. economy.
On the inventories side, the ISM survey says:
Manufacturers’ inventories contracted at a slower rate in February as the Inventories Index registered 47.3 percent. The index is 0.8 percentage point higher than the seasonally adjusted January reading of 46.5 percent. An Inventories Index greater than 42.6 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis’ (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).
On employment, we hear:
ISM’s Employment Index registered 56.1 percent in February, which is 2.8 percentage points higher than the seasonally adjusted 53.3 percent reported in January. This is the third month of growth in manufacturing employment, and the highest reading since January 2005 (58.7 percent). An Employment Index above 49.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.
Bottom line: despite the slight down tick, this report is pretty bullish.
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