U.S. ISM Manufacturing Index (February 2024)

Andrew Hencic, Senior Economist | 416-944-5307

Date Published: March 1, 2024

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ISM Shows U.S. Manufacturing Slows More than Expected in February

  • The ISM Manufacturing Index tumbled to 47.8 in February, falling well short of the 49.5 level markets had expected. However, eight industries reported growth in February, up from four in January. 
  • The new orders sub-index flipped back to contraction, falling 3.3 percentage points (pp) to 49.2. On the bright side, new export orders jumped 6.4 pp to 51.6. The employment index signaled a deeper contraction from last month (45.9), and has now fallen for five months in a row. 
  • The production index fell 2.0 pp to 48.4 and is now showing a contraction in output. With shrinking demand and output, the backlog of orders fell for the 17th month in a row (46.3), albeit at a slower pace. 
  • The prices paid sub-index took a small step back to 52.5 (52.9 in January). This is the second month in a row of rising prices.  

Key Implications

  • February was not a great month for the manufacturing sector as the ISM report suggests the contraction picked up steam last month. The details of the report were fairly weak too, with the one silver lining being that eight (of eighteen) industries reported growth – doubling up on the four reported in January. 
  • The recovery in the factory sector continues to proceed in fits and starts. While today's report showed the contraction deepened, the trend over the past six months has seen marginal improvements. For the Fed, soft new orders for manufactured goods will come as a welcome sign, building the case that demand has cooled in early 2024. Eyes will now be on Tuesday's services sector report to see whether weaker demand is broad-based or confined to the goods producing sector.  

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