US manufacturing continued to contract in February, ISM says

The downturn in American manufacturing eased a little last month and so did price pressures, the results of a closely followed survey revealed.

The Institute for Supply Management's factory sector Purchasing Managers' Index rose from a January reading of 47.4 to 47.7 in February (Consensus: 47.8).

A sub-index for production eased from 48.0 to 47.3 while that for new orders improved from 42.5 to 47.0.

Nonetheless, being below 50 both readings continued to point to a contraction, which sped up in the case of the former but eased in the case of the latter.

In parallel, a gauge tied to employment slipped from 50.6 to 49.1 and that for prices rose from 44.5 to 51.3.

On a somewhat more positive note, upbeat comments from purchasing managers' canvassed by the ISM appeared to outnumber negative ones, albeit sprinkled with references to supply chain issues and other caveats.

One manager from the Computer and Electronic Products space told the survey compiler that it had been a good start to the year for bookings.

But the same manager went on to add that: "Factory sector activity in the US experienced a solid decline last month as levels of output and new orders registered further falls."

Another manager form the Transportation Equipment sector said sales were still "solid" but noted "concern for the global supply chain now that we are restricting sales of some semiconductors to China."

Timothy Fiore, the survey chair, said: "The U.S. manufacturing sector again contracted, with the Manufacturing PMI improving marginally over the previous month.

"With Business Survey Committee panelists reporting softening new order rates over the previous nine months, the February composite index reading reflects companies continuing to slow outputs to better match demand for the first half of 2023 and prepare for growth in the second half of the year."

According to Andrew Hunter at Capital Economics, February's "modest" rebound should temper recent talk of resurgent factory activity "on the back of improvements seen in other major economies."

However, the prices paid index, at 51.3, while a potential concern, was still consistent with a "sharp" drop in the headline rate of consumer prices.

"It’s also worth noting that the supplier deliveries index was little changed at 45.2, close to its weakest since the global financial crisis, suggesting that inflationary pressure from supply chain shortages continues to ease."