Economic activity in the manufacturing sector grew in February, with the overall economy achieving a 21st consecutive month of growth although the U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment, the Institute for Supply Management reports.
The COVID-19 omicron variant remained an impact in February; however, there were signs of relief, with recovery expected in March. A higher-than-normal quits rate and early retirements continued. Panel sentiment remained strongly optimistic, with 12 positive growth comments for every cautious comment, up from January’s ratio of 7-to-1.
Demand expanded, with the (1) New Orders Index increasing and remaining in strong growth territory, supported by stronger expansion of new export orders, (2) Customers’ Inventories Index remaining at a very low level and (3) Backlog of Orders Index increasing to historically high levels.
Consumption (measured by the Production and Employment indexes) grew during the period, though at a slower rate, with a combined minus-0.9-percentage point change to the Manufacturing PMI® calculation. The Employment Index expanded for a sixth straight month; panelists indicate their ability to hire continues to improve, but to a lesser degree than in January.
Challenges with turnover (quits and retirements) and resulting backfilling continue to plague panelists’ efforts to adequately staff their organizations. Production expanded satisfactorily, despite staffing and supplier delivery headwinds. Inputs — expressed as supplier deliveries, inventories, and imports — continued to constrain production expansion. The Supplier Deliveries Index again slowed at a slightly faster rate, while the Inventories and Imports indexes increased, both at slightly faster rates. In February, the Prices Index increased for the 21st consecutive month, at a slightly slower rate.