The report issued today by the National Association of Purchasing Management (NAPM) said February's index rose slightly above January's low. Norbert Ore, C.P.M. of NAPM's Manufacturing Business Survey Committee said, The manufacturing sector continued to contract in February. However, the survey committee sees a slowing in the rate of decline in six of the 9 indexes, a positive sign. This could be an indication that the manufacturing sector bottomed in January, though we must caution that it takes more than one month's data to make that determination. Bright spots were New Orders and Backlog of Orders which, though still declining, slowed significantly in their rate of decline, added Ore. February is the seventh consecutive month in which economic activity declined in the manufacturing sector.
NAPM's Purchasing Manager's Index (PMI) for February, 41.9 percent, is up slightly from January's 41.2 percent. At 41.9 percent, the index is well below a reading of 50 percent, which indicates the economy is generally expanding. Furthermore, a reading under 42.7 percent indicates a recession. The manufacturing sector definitely lacks momentum. While volumes are falling, many industries are still experiencing upward price pressures driven primarily by energy costs. The reduction in employment accelerated during the month, said Ore.
Purchasing Managers across several industries are concerned about the first half of the year. Many of those concerns stem from the automotive and construction industries, as both experience reduced activity and have far-reaching consequences.
Of the 20 industries in the manufacturing sector, tobacco and food appear to be doing well with some resurgence in agricultural equipment, according to the report.
The NAPM's PMI is a diffusion index based on data compiled monthly on replies from purchasing executives in 350 industrial companies across the country. The executives are asked to assess conditions as they expand or contract. The number index is derived from the percentage of positive responses plus one-half of those saying conditions are the same (considered positive).