PMI surges to highest point in almost two years

ISM Report shows manufacturing index at 54.2%; year-end stall seems to be easing

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The economic acceleration since the beginning of the year continued in the manufacturing sector, as the February PMI Index from the Institute for Supply Management jumped to its highest level since June 2011.

The 54.2% index reading for the February PMI was the third straight month of growth for the sector. The index climbed to its highest point since a 55.8% reading 20 months ago, and is up almost 9% since the index slipped below the 50% growth point to 49.9% in November 2012.

“The New Orders Index registered 57.8%, an increase of 4.5% over January's reading of 53.3%, indicating growth in new orders for the second consecutive month,” said Bradley J. Holcomb, chair of the Institute for Supply Management’s Manufacturing Business Survey Committee. “As was the case in January, all five of the PMI's component indexes—new orders, production, employment, supplier deliveries and inventories—registered in positive territory in February. In addition, the backlog of orders, exports and imports indexes all grew in February relative to January.”

Among the comments from survey respondents: 

• "Automotive is still going strong, which allows budgeting for capital equipment." (Machinery)
• "Overall business is good." (Food, Beverage & Tobacco Products)
• "Starting to pick up after a slower than normal year-end." (Miscellaneous Manufacturing)
• "More RFQs coming in than the past three months." (Nonmetallic Mineral Products)
• "Workload is growing; need qualified machinists." (Fabricated Metal Products)
• "Business seems to be on an uptick. The normal seasonal downturn for us has been much shorter and not as severe as in the past four years." (Furniture & Related Products)

The Last 12 Months:

A PMI in excess of 42.2% generally indicates an expansion of the overall economy. “The past relationship between the PMI and the overall economy indicates that the average PMI for January and February (53.7%) corresponds to a 3.6% increase in real gross domestic product on an annualized basis,” said Holcomb. “In addition, if the PMI for February (54.2%) is annualized, it corresponds to a 3.7% increase in real GDP annually.”