Weak foreign markets, coupled with the west coast strike, are to blame for another month of slowing manufacturing growth in February.
The west coast port labor strike played a significant role in this month’s numbers reported by the Institute for Supply Management. ISM’s top-line purchasing index dropped to 52.9 in February, from 53.5 in January.
In addition, ISM reports the following:
- The New Orders Index registered 52.5 percent, a decrease of 0.4 percentage point from the reading of 52.9 percent in January.
- The Production Index registered 53.7 percent, 2.8 percentage points below the January reading of 56.5 percent.
- The Employment Index registered 51.4 percent, 2.7 percentage points below the January reading of 54.1 percent.
- Inventories of raw materials registered 52.5 percent, an increase of 1.5 percentage points above the January reading of 51 percent.
- The Prices Index registered 35 percent, the same percentage as in January, indicating lower raw materials prices for the fourth consecutive month.
While this is the fourth consecutive month that ISM is reporting slower growth, the organization cautions that anything over 50 is still considered ‘growth’. “Economic activity expanded in February for the 26th consecutive month, and the overall economy grew for the 69th consecutive month,” ISM reports.
Due to the port strike, a high number of manufacturers reported problems getting materials on time. “We had to air-freight user interfaces [like touchpads] and printed circuit boards to keep production going” in the U.S., Jim Keppler, vice president of integrated supply chain and quality at Whirlpool, said in his ISM survey response. “I am absolutely happy an agreement was reached,” he said.
Also, Subaru has reported spending millions per month to have airlift parts from Asia.
Of the 18 manufacturing industries ISM tracks, 12 reported growth in February in the following order: Paper Products; Printing & Related Support Activities; Furniture & Related Products; Primary Metals; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Fabricated Metal Products; Machinery; Transportation Equipment; Electrical Equipment, Appliances & Components; and Chemical Products. The three industries reporting contraction in February are: Textile Mills; Apparel, Leather & Allied Products; and Computer & Electronic Products.
Read more: Institute for Supply Chain