February ISM Manufacturing PMI 47.7, Fourth Straight Month Sub-50.0%

The ISM Manufacturing Index edged higher to 47.7 in February of 2023 from 47.4 in January, which was the lowest since May 2020. The report reflects a general contraction in manufacturing activity and marks the fourth straight month with a sub-50.0% reading. The result was consistent with the regional Chicago PMI’s sixth consecutive month of contraction in business activity in the Chicago region. Clearly the cumulative effect of rate hikes around the globe is adversely impacting demand, evidenced by the six straight contraction in the new orders index, though it increased to 47.0% from 42.5%.

 February ISM Manufacturing Index Highlights

  • ISM Manufacturing PMI 47.7% (consensus 47.8%) from 47.4% in January.
  • The New Orders Index increased to 47.0% from 42.5%.
  • The Prices Index jumped to 51.3% from 44.5%.
  • The Backlog of Orders Index increased to 45.1% from 43.4%.
  • The Supplier Deliveries Index dipped to 45.2% from 45.6%.
  • The Production Index fell to 47.3% from 48.0%.
  • The New Export Orders Index rose to 49.9% from 49.4%.
  • The Employment Index dropped to 49.1% from 50.6%.

PMI Survey Respondents Comments

  • “Good start to the year for bookings. Electronic components, specifically processors, continue to be challenging due to the risk of not hitting the commit dates, even with the extended lead times quoted.” [Computer & Electronic Products]
  • “A slowdown in new housing construction and concerns of a slowing economy have customers delaying purchases in an effort to destock.” [Chemical Products]
  • “Sales remain solid, and most assembly plants are running at capacity. There is concern for the global supply chain now that we are restricting sales of some semiconductors to China.” [Transportation Equipment]
  • “Expect the first half of 2023 in the U.S. to be slower than the second half. Expect slower orders throughout 2023 for Europe.” [Food, Beverage & Tobacco Products]
  • “Even though our number of quotes are down, we are still staying busy, and our backlog has a lot to do with it. A backlog of 30-plus weeks is not ideal.” [Machinery]
  • “Business and new orders are softening, and customers are pushing out current orders.” [Plastics & Rubber Products]
  • “New orders are steady; production has been running consistently for several months. Many items remain in short supply (particularly anything electronics) and require daily monitoring to ensure supply.” [Electrical Equipment, Appliances & Components]
  • “New orders are still strong; however, we continue to experience price increases (although at a slower rate than a year ago), which we have not accounted for in this year’s budget. Restoring lost margin due to cost increases is a top priority.” [Fabricated Metal Products]
  • “We shipped some long-term backlogged orders, enabling some progress on our current backlog.” [Miscellaneous Manufacturing]
  • “Business conditions are still strong; however, inventory has exceeded our planned levels. This will impact operations until the inventory situation is resolved.” [Primary Metals]
  • “While there are lingering concerns about a recession, we are not expecting a large drop-off in manufacturing this year. Worst case is flat.” [Nonmetallic Mineral Products]

Source ISM World

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