Manufacturing index rises, but remains in contraction overall

The Purchasing Manufacturers' Index (PMI) rose for the second straight month to 49.5% as the overall economic outlook remains more positive than it had been in previous months.

By Bob Vavra, Content Manager, CFE Media March 4, 2016

While the monthly Purchasing Manufacturers’ Index (PMI) from the Institute for Supply Management (ISM) remained in contraction for the fifth consecutive month in February, there were small signs that the decline in the manufacturing sector may be easing.

New orders were up and production improved in February as the PMI rose to 49.5%, an increase of 1.3 percentage points from January. Bradley Holcomb, chairman of the Institute for Supply management’s Manufacturing Business Survey Committee, said there was more optimism last month.

"Comments from the panel indicate a more positive view of demand than in January, as 12 of our 18 industries report an increase in new orders, while four industries report a decrease in new orders," said Holcomb in a press release.

The PMI for February was above the 49.4% level in October 2015, which was the first month the index had been in decline for three years. After hitting 48.0% in December 2015, the PMI has been on the rise in the last two months.

The New Orders Index was at 51.5%, the same reading as in January, and the Production Index rose 2.6 percentage points to 52.8%. Another good sign is that raw material prices remained low, sitting at 38.5%. It was the 16th straight month prices remained below the growth threshold.

Among the comments from committee members:

  • "Low oil prices and reduced activity continue affecting our business." (Petroleum & Coal Products)
  • "U.S. business demand is solid; international demand is soft." (Chemical Products)
  • "Mobility spend is up." (Computer & Electronic Products)
  • "Business has to get better. And it appears it is. Healthy backlog for 2016." (Fabricated Metal Products)
  • "Very strong demand for product. Material availability very good and commodity pricing continues to be depressed." (Machinery)
  • "Market is beginning to trend up with spring season on its way." (Wood Products)
  • "Not seeing impact from global economic volatility or oil prices. Business is strong and growth projections remain the same." (Miscellaneous Manufacturing)
  • "Orders are coming in stronger than expected." (Furniture & Related Products)

Bob Vavra is content manager, Plant Engineering, CFE Media,