Think you’re glad spring is finally here? Nobody is happier that spring has sprung than the manufacturing industry, which got slammed by the weather in several ways in February, according to the Manufacturing Institute for Supply Management (ISM) Report on Business.
Representatives from several industries, including Apparel, Leather & Allied Products; Petroleum & Coal Products; and Chemical Products all reported weather disruption, either through reduced orders, raw material disruptions, or other logistical issues, according to the report. While there are some things you can control, there are many others that you cannot, and weather is certainly one factor completely out of our hands.
However, the immediate future is bright, according to the ISM report which contained mostly good news. One respondent in the machinery industry said about the month of February, “conservative optimism is re-kindling.” The vast majority of manufacturing industries including Fabricated Metal Products and Primary Metals, among others, saw growth in February.
To measure monthly growth, ISM uses PMI, a composite index based on five other indexes: New Orders (seasonally adjusted), Production (seasonally adjusted), Employment (seasonally adjusted), Supplier Deliveries (seasonally adjusted), and Inventories. The February PMI was 53.2 percent, and economic activity in the manufacturing sector expanded in February for the ninth consecutive month, while the overall economy grew for the 57th consecutive month, said Bradley Holcomb, chair of the ISM Manufacturing Business Survey Committee, which produces the report every month.
So what does a PMI of 53.2 mean exactly? A reading above 50 percent indicates that the manufacturing economy is generally expanding and a PMI in excess of 43.2 percent, over a period of time, generally indicates an expansion of the overall economy. February’s PMI represents an increase of 1.9 percentage points from January’s reading of 51.3 percent, according to Holcomb. Ultimately, this means good news for the economy in general.
As mentioned earlier, out of the 18 manufacturing industries that the committee follows for the report, they all reported growth in February except for Apparel and Petroleum – in other words, the two industries nailed by the weather – as well as Miscellaneous Manufacturing.
As you might expect, for industries to show growth, it helps to get new orders. So it’s not surprising that the three segments that didn’t show growth also didn’t show growth in new orders. Other industries that didn’t show growth in new orders were Furniture & Related Products; Computer & Electronic Products; and Nonmetallic Mineral Products. Altogether, though, the New Orders Index registered 54.5 percent in February, an increase of 3.3 percentage points when compared to the January reading of 51.2 percent – which, like the PMI, also represents growth for the ninth consecutive month.
How did your small business manufacturing company fare in the winter months? Do you expect growth come spring time? We’d love to hear your thoughts. The next Manufacturing ISM Report On Business,featuring the March 2014 data, will be released at 10:00 a.m. (ET) on Tuesday, April 1, 2014. Stay tuned – we’ll be blogging about that as well!
Steve Leavitt, GM of U.S. Cloud Solutions for Exact