Robust Feb US manufacturing statistics point to strong year

03 March 2011 17:28  [Source: ICIS news]

ATLANTA, Georgia (ICIS)--Robust numbers from a key group of US manufacturing statistics points to a strong economic performance in 2011, the head of the statistics' survey committee said on Thursday.

The statistics were released earlier this month by the Institute for Supply Management (ISM).

On key indicator – manufacturing new orders minus manufacturing inventories – was +19.2 for February, a very high level.

February's figure is comparable to +21.8 in December 2009, when the US economic recovery gained momentum in earnest. The indicator was as low as -16.4 in December 2008.

“We see this as positive for growth going forward. And we will likely continue to see higher overall prices until demand destruction starts to take place,” said Norbert Ore, chair of the ISM Manufacturing Business Survey Committee, who spoke at the ISM Chemical Group Conference in Atlanta, Georgia.

Eventually, “the cure for higher prices is higher prices”, he added.

ISM manufacturing numbers came in very strong in February, with the benchmark Purchasing Managers Index (PMI) at 61.4.

The PMI is a composite of supplier responses to the institute’s monthly survey of 10 different business performance measures in the 18 major manufacturing sectors.

Any level over 50 indicates growth in manufacturing, while under 50 indicates contraction.

Ore expects the PMI to reach an average 54.5 in 2011, still indicating growth from 2010. Last year’s average PMI was 57.3, indicating growth over 2009.

The Manufacturing New Orders Index, a leading indicator of activity, came in at a robust 68.0.

“It just can’t get much better than this. Manufacturing activity is being driven by exports, which are improving dramatically with the weak dollar,” Ore said.

Customer inventories also remain low with the Manufacturing Customer Inventories Index at 40.0.

“This is too low. There is room for inventory replenishment,” Ore said.

While economic indicators remain positive, the housing and construction sector will continue to lag, without a significant improvement until 2014. And any impact in higher crude oil prices could be seen in the March and April manufacturing numbers, Ore added.

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy

By: Joseph Chang
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