Manufacturing Inches Ahead

Don Hogsett, March 12, 2007

Extending its seesaw pattern of the past several months, the manufacturing sector staged something of a comeback in February, recovering from a drop the month before and moving ahead on all cylinders, at least for the moment, the nation's purchasing managers reported.

In a monthly update on the strength of the manufacturing sector, a key driver of the U.S. economy, the Institute for Supply Management (ISM) said its Purchasing Managers' Index climbed back on track during February after slowing down in January and dropping beneath the threshold level of 50, the dividing line between expansion and contraction.

"February proved to be a good month in the manufacturing sector as new orders, production and employment contributed to a solid growth," said Norbert Ore, chairman of the ISM's Manufacturing Business Survey Committee. In more good news from smokestack America, he said, "The Inventories Index showed significant reduction in manufacturers' inventories for the second consecutive month, and the Backlog of Orders Index is growing once again."

On the downside, Ore noted, the prices manufacturers pay for supplies and raw materials is climbing as well, jumping up six percentage points to a reading of 59, the highest level in five months. Even so, said Ore, "Concern about prices is still minimal due to the small number of commodities indicated as up in price."

Cheered by the February rebound, Ore observed, "The trend in manufacturing, as well as the overall economy, is for slow but continuing growth."

Driving the overall improvement in February, the New Orders Index jumped up 4.6 points to a reading of 50.3; the Production Index climbed by 4.5 points to a level of 49.6, and the Order Backlogs Index shot up by 8 points to a reading of 43.5.

February snapshot
Manufacturing benchmarks
Month-over-month percentage change

Source: Institute for Supply Management
Purchasing Managers' Index 3.0
New Orders 4.6
Production 4.5
Employment 1.6
Inventories 4.7
Customers' Inventories 1.0
Prices Manufacturers Pay 6.0
Order Backlogs 8.0
Export Orders 1.5
Imports 7.0

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