Economy

ISM PMI Hovers Near Neutral Mark

March 3, 2020

U.S. manufacturing activity grew only slightly in February, according to the latest Manufacturing ISM Report On Business. The Institute for Supply Management reported that the February PMI decreased 0.8 points to 50.1, just above the no-change mark of 50.

The PMI for new orders fell into contraction at 49.8, while production dropped four points to register 50.3. The production index slid 4.0 points to 50.3. Production was restricted by supply chain disruptions, said ISM, which led to longer backlogs.

“Lead times are generally stable,” said ISM Chairman Timothy Fiore. “Concerns about current and ongoing reliable Asian supply dominated the comments from panelists.”

Raw material inventories contracted during February and customer inventories were reported as “too low” for the 41st consecutive month.

The prices Index dropped 7.4 points to 45.9. The contraction was driven primarily by steel, scrap steel, aluminum, natural gas, corrugate, copper and all basic manufacturing fundamentals, said Fiore.

New export and import orders fell last month, decreasing 2.1 and 8.7 points, respectively. Survey participants reported that operations were affected by the coronavirus outbreak.

Employment fell for a seventh month, but at a slower rate than January.

Survey comments included:

“Layoffs are here.” (Transportation Equipment)
“Current favorable forecast to budget for first-quarter sales.” (Primary Metals)
“Coronavirus continues to be front and center as a major supply chain risk to our company. Access to information in China — from our supply base and customers — is slow to come by.” (Fabricated Metal Products)
“Sales continue to be strong, with the supply base able to support as required. The major concern is the China virus and what that crisis could affect in getting parts. The company is putting plans in place to source out locations, especially in the U.S., for parts.” (Machinery)
“Energy markets seem to be responding to a potential drop in demand that may be related to responses [to] the coronavirus.” (Petroleum & Coal Products)
“January started out strong, but the effects of the virus in China [and] the continued grounding of the 737 Max have suppressed new orders. We are still expected to be flat to slightly up [year-over-year] for 2020 sales, based on those issues.” (Chemical Products)
“There are always supply chain challenges with Lunar New Year shutdowns, and this year is no different. Coronavirus is wreaking havoc on the electronics industry. Companies are delayed in starting up production, which is resulting in longer lead times, constraints and increased pricing. It’s a mad dash to dual source stateside in case China isn’t back online soon.” (Computer & Electronic Products)

Below is a graph showing the history of the ISM Manufacturing Index. You will need to view the graph on our website to use its interactive features; you can do so by clicking here. If you need assistance logging in to or navigating the website, please contact us at info@SteelMarketUpdate.com.