US manufacturing shrinks for 16th month, but downturn may be stabilizing – ICIS economist

HOUSTON (ICIS)–US manufacturing activity shrank for a 16th consecutive month in February, with the purchasing managers’ index (PMI), compiled by the Institute for Supply Management (ISM), falling to 47.8 points, from 49.1 in January.

PMIs below 50.0 indicate a contraction in manufacturing and PMIs above 50.0 indicate an expansion.

Although the pace of the contraction was faster than in January, it slowed compared with 2023, said Kevin Swift, ICIS senior economist for Global Chemicals.

Also, despite the latest decline, eight industries out of 18 expanded in February, up from four in January, Swift said, adding, “the manufacturing downturn may be stabilizing”.

In the chemical industry, activity expanded for a second month, following 16 months of decline.

• Manufacturing production retreated into contraction last month, as did new orders.
• Order backlogs contracted, but at a slower pace than in January.
• Inventories contracted for a 13th month, with the pace accelerating.

The low inventory could provide a floor for output, Swift said, adding, “The long and deep de-stocking cycle could be ending, with the possibility for re-stocking later this year.”

Although demand remains slow, manufacturing may be at the early stages of a recovery, he said.

Prices edged up for a second month in February, but the pace of the increase slowed from January.

Prices are sensitive to changes in supply and demand and tend to provide a leading signal, the economist said.

MANUFACTURING AT A GLANCE
February 2024

(Source: Institute for Supply Management)

Thumbnail shows an automobile being manufactured. Image by Ng Han Guan/AP/Shutterstock.