KPI – March 2024: State of Manufacturing

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Economic activity in the manufacturing sector contracted in February for the 16th consecutive month, following one month of “unchanged” status (a PMI reading of 50%) and 28 months of growth, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.

The Manufacturing PMI registered 47.8% in February, down 1.3 percentage points from the 49.1% recorded in January.

“The U.S. manufacturing sector continued to contract (and at a faster rate compared to January), with demand slowing, output easing and inputs remaining accommodative,” says Timothy R. Fiore, CPSM, C.P.M., chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee.

Fiore notes minor signs of improvement: Demand is in early stages of improvement, and production execution is relatively stable compared to January, as panelists’ companies begin to prepare for expansion.

Overall, he says suppliers continue to have capacity but are showing signs of struggling, partly due to raw material supply chains. Forty percent of manufacturing gross domestic product (GDP) contracted in February, down from 62% in January.

“More importantly, the share of sector GDP registering a composite PMI calculation at or below 45% – a good barometer of overall manufacturing weakness – was 1% in February, compared to 27% in January and 48% in December. Among the top six industries by contribution to manufacturing GDP in February, none had a PMI® at or below 45%, compared to two in the previous month,” Fiore explains.

KPI – March 2024: State of Manufacturing | THE SHOP

Caption: Ford’s F-Series was crowned top sales in 2023, with a 15% year-over-year increase in sales. While the F-Series remains a leader in vehicle sales during 2024, the numbers were down 5.8% year-over-year in February. Meanwhile, the Chevrolet Silverado was up 12.3% year-over-year.

Important Takeaways, Courtesy of the Manufacturing ISM Report On Business:

  • Demand moderated, with the (1) New Orders Index back in contraction as seasonal headwinds were too strong to overcome; (2) New Export Orders Index returned to expansion; and (3) Backlog of Orders Index is improving but still in moderate contraction territory.
  • The Customers’ Inventories Index contracted for the third consecutive month, remaining accommodative for future production.
  • Output (measured by the Production and Employment indexes) dropped, with a combined 3.2-percentage point downward impact on the Manufacturing PMI® calculation. Panelists’ companies maintained their production levels month-over-month, but growth could not outpace seasonal factors. Head-count reductions continued in February, with notable layoff activity.
  • Inputs – defined as supplier deliveries, inventories, prices and imports – continued to accommodate future demand growth but showed signs of stiffening.
  • The Supplier Deliveries Index improved again, moving into “slower” territory; however, the Inventories Index slid back due to inability for growth consistent with seasonal factors, remaining in moderate contraction territory.
  • The Prices Index remained in moderate expansion (or “increasing”) territory as commodity driven costs continue to oscillate.

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