The Institute for Supply Management (ISM) index of manufacturing for February rose 1.7 points to 60.8 – a new cycle high – beating market expectations of a slight decline to 58.7. This marks the 18th consecutive month that the index has been in expansionary territory.
The underlying details of the report were mixed, with the headline index driven by a strong advance in employment (+5.5 to 59.7), inventories (+4.4 to 56.7 – a cycle high), and supplier deliveries (+2.0 to 61.1). Although both production and new orders declined, they still remain near cycle highs that were reached at the end of last year.
Prices paid rose 1.5 points to 74.2, also a new cycle high.
The spread between new orders and inventories – a good leading indicator of activity – narrowed to 7.5 (-5.6 points) in February. Overall this indicator remains consistent with manufacturing activity continuing to expand through the first quarter of 2018.
Key Implications
The U.S. manufacturing sector continues to surprise to the upside, as demand for U.S. manufactured goods remains robust. Moreover, comments by survey participants were optimistic, suggesting that demand is being supported by tax cuts, and that capacity pressures, exchange rate volatility, and component shortages are pushing up input prices.
Alongside strong domestic demand come encouraging signs of robust foreign demand. New export orders surged to a cycle-high, and PMI manufacturing surveys reported this morning suggest that global demand for manufactured goods remains strong in many parts of the world. This bodes well for first quarter global trade volumes and economic activity more broadly.
 index of manufacturing for February rose 1.7 points to 60.8 - a new cycle high - beating market expectations of a slight decline to 58.7. This marks the 18th consecutive month that the index has been in expansionary territory.){kind=link}