Manufacturing strengthened in February, helped by hiring, the Institute for Supply Management (Tempe, AZ) said today.
The group’s manufacturing index, known as PMI, rose to 60.8% last month, up from 59.1% in January, the group said in a monthly report. It was the highest index reading since May 2004.
“Employment was the single biggest contributor” to the PMI in February, Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee, said on a conference call.
The rise in the index came despite a slowing in growth for new orders and production, two major parts of the PMI. However, Fiore said both are still running at strong levels. “Everything we’re seeing is that demand will continue,” he said.
ISM said 15 of 18 industries showed economic expansion. They included primary metals, machinery, petroleum and coal products, fabricated metal products, transportation equipment and miscellaneous manufacturing. The group said only two industries reported economic contraction, apparel and furniture.
“This data demonstrates the steady growth in the manufacturing sector, which we have seen consecutively over the past year,” Anthony Sasso, president of TD Equipment Finance at TD Bank, said in a written statement after the report was released.
“With the anticipated benefits of the recently approved Tax Reform Act, we expect that activity will pick up throughout this quarter and for the remainder of 2018,” Sasso said. Under that tax law, the corporate tax rate was cut to 21% from 35%.
The ISM report is based on a survey of 350 purchasing and supply executives. A reading above 50% indicates economic expansion and below 50% indicates contraction. The PMI has averaged 58% the past 12 months. The February PMI reflected the 18th consecutive month of expansion.
ISM’s Employment Index advanced to 59.7%, up from 54.2% in January. The organization said 11 of 18 industries reported employment growth, with no industry reporting job cuts. ISM said companies were hiring to support increases in production.
The group’s New Orders Index cooled to 64.2% from 65.4% in January, with 15 of 18 industries reporting increases in orders. The institute’s Production Index fell to 62% from 64.5% in January. ISM said 14 of 18 industries reported output gains, with apparel and furniture having monthly declines in production.
“Expansion over 60(%) is really strong,” Fiore said.