Northwest Arkansas Democrat-Gazette
Manufacturing lower, but still shows expansion
WASHINGTON — American factories expanded in February for the second straight month, despite disruptions caused by the coronavirus outbreak. The winning streak, however, may prove short-lived.
The Institute for Supply Management, an association of purchasing managers, said Monday that its manufacturing index registered 50.1 last month. That is down from 50.9 in January. But anything above 50 signals growth.
The February reading was slightly lower than economists expected.
Fourteen of 18 manufacturing industries expanded in February, led by wood products and furniture manufacturers.
The institute’s index showed that American
manufacturing contracted from August through December last year, hobbled by President Donald Trump’s trade wars, which raised costs and generated uncertainty about where to locate factories and buy supplies.
Much of China has been locked down because of the coronavirus, disrupting supply chains that many U.S. companies rely on.
In February, manufacturing production and new export orders grew. But new orders and hiring contracted in February.
Timothy Fiore, chairman of the institute’s manufacturing survey committee, said factories were expanding but only “at a weak level.”
“Global supply chains are impacting most, if not all, of the manufacturing industry sectors,” Fiore said in a statement. “Concerns about current and ongoing reliable Asian supply dominated the comments from panelists,” with a number mentioning the virus impact.
Economists Oren Klachkin and Gregory Daco of Oxford Economics predicted that the February expansion would prove “a last gasp” before the index returns to negative.
Jim Bianco, head of his own financial research firm, attributed the February growth to “a statistical quirk” in a tweet.
Deliveries from suppliers slowed sharply, normally a good sign that the economy is booming and factories are straining to keep up, but now evidence of clogged up supply chains.
“Suppliers are having more difficulty delivering,” Fiore said, adding, “This could easily have been a contraction month.”
The imports index swung into contraction, falling the most on record to 42.6, the lowest reading since 2009. Export orders grew at a slower pace.
Another U.S. factory gauge, produced by IHS Markit, fell to the lowest since August. The final measure for February dropped to 50.7 from 51.9 a month earlier.
Other purchasing managers’ indexes for manufacturing in Asia took a tumble, with a severe contraction in activity in China driving down output across the region.
Global manufacturing contracted in February by the most since 2009 as the coronavirus severely disrupted demand, trade and supply chains.
The JPMorgan Global Manufacturing purchasing managers’ index fell 3.2 points to 47.2, snapping a three-month streak of expansionary readings, according to a report released Monday. Production plunged the most in almost two decades while the measure of new export orders also fell to the lowest since 2009.
The report adds to signs that the global economy faces its biggest test since the global financial crisis just as concerns about trade tensions had begun to ease. The Paris-based Organization for Economic Cooperation and Development warned Monday that global economic growth will sink to decade lows as the coronavirus outbreak hammers demand and supply.
Factory employment declined for a third straight month, with the rate of job losses the fastest since 2009. Output contracted in 15 of 31 economies, including Australia, China, France, Germany, Italy, Japan, South Korea and Taiwan. Brazil, Canada, India, Mexico, the U.K. and the U.S. saw output growth.
The figures reflect record weakness in Chinese manufacturing data, amid factory shutdowns from China to South Korea and growing fears that the outbreak will turn into a global pandemic. Bank of America Corp. economists warned clients on Thursday that they now expect 2.8% global growth this year, the weakest since 2009.