The ISM Manufacturing Index is derived from a survey of purchasing managers and their outlook on overall conditions by looking at factors such as orders for durable goods, industrial production and hiring. It gives a general direction rather than the specific strength of the factory sector and manufacturing activity in the U.S. A reading above 50 is an indicator that the manufacturing sector is growing while a reading below 50 indicates a contraction.
The February 2020 ISM Manufacturing report came in at a level of 50.1, depicting a slight, -0.8% decrease since the January value of 50.9. The index was lower than the expectation of 50.5. The index has also increased by 6.49% from September, which was the bottom of the recent manufacturing recession, to January. However, there has been a slight dip between January and February, and the index has begun to shift downward.
Manufacturing has rebounded sharply in January, topping estimates, and signaling growth since the beginning of the manufacturing recession. The ISM Manufacturing report surged to 50.9 in January after hitting another almost 4-year low of 47.8 and was the first strong manufacturing expansion seen in six months. However, whether this expansion is sustainable is still questionable as we have begun to see a slight dip in February, most likely an impact of the coronavirus outbreak. Imports and inventories have contracted by -8.7% and -2.3%. The ISM measure shows that, generally, both the manufacturing sector and economy is growing, but at a relatively slow rate of delicate expansion that is highly dependent on activity abroad.
March 6, 2020