EconoFACTS

March 01, 2023 | 10:42

Pickup in U.S. ISM Manufacturing PMI .... Better than the alternative

Economist

Jennifer Lee

Senior Economist and Managing Director
Economics

(Read more)

Jennifer Lee

Senior Economist and Managing Director
Economics

(Read more)

Ok.... you can open your eyes now. Not as bad as expected...

The U.S. manufacturing ISM inched up for the first time in six months but adding 0.3 pts to 47.7 in February, well, I'm not going to write home about it. Besides, this is still the fourth consecutive month of contraction. (Even longer if you look at the Euro Area or the U.K.) Still, it is interesting given that many regional surveys took a hit in February. In any event, new orders jumped 4.5 pts, the first pickup in five months, which bodes well for future activity although the level is still sub-50. Production slipped for the fourth consecutive month, and employment was down again. However, there was one notable move which will not sit well.... prices paid rose for the second month in a row, landing at a 5-month high of 51.3. Add that to all the upside surprises in various price indicators of late (supercore, CPI, PPI, etc) In other words, the Fed's job is not done, as officials have been saying for a long time now.

The comments were notable as they reflected the struggles that manufacturers are going through. There were no comments on difficulty sourcing labour, and a few respondents mentioned 'strong' orders. But there were some warnings of high inventory levels and price hikes, as well as renewed global supply chain concerns given restrictions of semiconductors to China.

Meantime, U.S. construction spending unexpectedly slipped 0.1% in the mild month of January while December's 0.4% drop was revised down to -0.7% and November's 0.5% increase was revised up to +1.8%. (Remember the volatility in this report!) Governments were doing all the cutbacks, while the private sector was flat. The private nonresidential segment rebounded (+0.9%), with a nice gain in offices (+0.5%), while housing continued to fall.

Bottom Line: The U.S. economy is trying to weather some ups and downs at the start of the year. Things are still not as weak as one would've imagined a year ago, but indicators are pointing to slower growth. No shock there. A mild contraction still in the works.

Table 1 - United States — ISM Manufacturing PMI

(percent reporting)

Source: BMO Economics, Haver Analytics