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Manufacturing slows in February

By Chavon Sutton, staff reporter


NEW YORK (CNNMoney.com) -- Manufacturing activity expanded in February for the seventh straight month, but at a slower pace, a purchasing managers' group said Monday.

The Tempe, Ariz.-based Institute for Supply Management's U.S. manufacturing index slipped to 56.5 from 58.4 in January.

Economists expected the index to fall slightly to 58.0, according to a consensus compiled by Briefing.com.

"It's obviously a weak report, but it follows a strong January report, which was the strongest we've seen in six years," said David Wyss, chief economist for Standard & Poor's. "We think a lot of this is weather-related."

In general, an index reading above 50.0 indicates manufacturing growth, while anything below 50 signals contraction. A reading above 42.0 generally implies expansion in the overall economy, making February the tenth consecutive month of economic growth.

The monthly report surveys ISM members, who are purchasing managers in the manufacturing industry.

Of the 18 manufacturing industries reporting, 11 posted growth including categories such as machinery, apparel, paper products, and computer & electronics. Five sectors reported contraction, including wood products, furniture & related products, and primary metals.

Employment: The employment index, a measure of growth in manufacturing jobs, also rose, reaching 56.1 from 53.3 in January. This is the third month of employment growth and the highest reading since January 2005.

"With these levels of activity, manufacturers are seemingly willing to hire where they have orders to support higher employment," said Norbert J. Ore, chair of the ISM Manufacturing Business Survey Committee in a press release.

While 10 of the 18 manufacturing industries posted job growth, four reported declines, including construction-related industries such as wood products and furniture & related products.

"Construction is the most weather-dominated industry," said Wyss. "It's clearly not turning around yet."

New orders and production: The ISM's new orders index and production index both fell to just below 60 in February.

The index of new orders for manufactured goods, a forecast of manufacturing activity in the near future, declined 6.4 percent to 59.5 in February. Still, this was the eighth consecutive month that the index was above 50.2, indicating growth in new orders. Wyss attributed the decline in new orders to stormy weather in February, which was in many places the worst on record.

The ISM's production index was 58.4, down from 66.2 in January, marking the ninth consecutive month the production index has been above 50.

"We think the first quarter will stay positive but not by much," said Wyss. "You always have to take these winter reports with a grain of highway salt." To top of page

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