ISM: expansion slips, price pressures ease in Feb.

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The overall economy grew for the 118th straight time, the Institute for Supply Management reported Friday.

According to the ISM's monthly report on business, the ISM index decreased to 54.2 in February from 56.6 in January.

Economists polled by IFR Markets predicted the index would be 57.3.

An index reading below 50 signals a slowing economy, while a level above 50 suggests expansion. A reading of 50 shows the sector was unchanged in the month.

The prices paid index decreased to 49.4 from 49.5, “indicating lower raw materials prices for the second straight month after nearly three years of increases,” according to the report. The employment index slid to 52.3 from 55.5.

The production index declined to 54.8 from 60.5, the new orders index fell to 55.5 from 58.2; the supplier deliveries index slipped to 54.9 from 56.2; the export orders index grew to 52.8 from 51.8; and the imports index gained to 55.3 from 53.8.

The inventories index rose to 53.4 from 52.8; the customers' inventories index decreased to 39.0 from 42.8; and backlog of orders climbed to 52.3 from 50.3.

Respondents' comments included:

  • “Strong domestics market. Slow export markets.” (Paper Products)
  • “Demand remains healthy at the beginning of 2019. However, growing concerns for what could be another round of tariffs in March are further escalating price increases of already constrained electronic components. Expect to see increased lead times and prices throughout Q1 and Q2.” (Computer & Electronic Products)
  • “Strong start to the year, though weather has been a challenge.” (Chemical Products)
  • “Still fairly steady with production and services.” (Transportation Equipment)
  • “Economy showing general strength, especially in manufacturing. Cost pressures and tariff challenges persist but are manageable. General outlook is for stability and potential improvement in the second half of 2019.” (Food, Beverage & Tobacco Products)
  • “Orders remain strong. Supplier delivery continues to be challenged on some commodities.” (Machinery)
  • “Aerospace engine-related business continues to be strong. Energy and general industry-related business is flat to down.” (Miscellaneous Manufacturing)
  • “Business so far this year is meeting, but not exceeding, our forecast. We are concerned about indicators showing a slight recession for the second half of the calendar year.” (Fabricated Metal Products)
  • “Uncertainty of steel prices due to Section 232 tariffs on imported steel and lack of resolution of the anti-dumping trade cases.” (Petroleum & Coal Products)
  • “General business conditions started to slow at the end of January, continuing through February.” (Plastics and Rubber Products)
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Economic indicators Manufacturing industry