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Manufacturing Grows Slightly Despite Weather Woes

04 March 2014

Snow, rain and sleet continued to take their toll on the nation’s manufacturing and logistics industries in February. But in spite of a significant slowdown in production, manufacturing activity overall was able to eke out a few points of growth.

Weather disrupted supply chains across the U.S. as airport and road closures delayed shipments of necessary materials to factories, manufacturing executives told the Institute of Supply Management (ISM) in its February monthly survey. As a result, ISM’s Production Index contracted 6.6 percentage points in February—to 48.2 percent—from January’s level of 54.8 percent. This is the lowest production reading since May 2009, when the index registered 42.7 percent. However ISM’s overall index, the PMI, increased in February by 1.9 percentage points to 53.2 percent. Anything over 50 percent is considered growth; anything below 50 is considered a contraction.

“Weather has undoubtedly had an impact on production,” said Bradley J. Holcomb, chair of ISM’s Manufacturing Business Survey Committee. At the same time production was slipping, raw materials inventories continued to grow. “If you look at the weather’s impact on logistics, you see a few things going on,” Holcomb said. “Manufacturers aren’t getting the right inventories when they need them. There have been closures or partial closures [of factories] when employees can’t get into work. Shipments of incoming raw materials have slowed—as have supplier deliveries—so the [inventory] buildup is directly tied to production.”

Demand has remained steady, however: ISM’s New Orders Index increased in February by 3.3 percentage points. Production is likely to tick up once the weather clears. “It would have to, because we are seeing a solid backlog in orders,” Holcomb said. Purchasing managers in the transportation and computer and electronics industries, in particular, reported higher-than-normal demand for this time of year. Raw materials prices are up slightly—consistent with seasonal trends—and imports and exports remain balanced. Overall—as evidenced from comments from the panel of purchasing and supply executives—manufacturers remain optimistic about 2014.

Of the 18 manufacturing industries ISM tracks, 14 reported growth in February in the following (descending) order: textile mills; wood products; machinery; printing and related support activities; plastics and rubber products; nonmetallic mineral products; transportation equipment; paper products; food, beverage and tobacco products; electrical equipment, appliances and components; fabricated metal products; furniture and related products; primary metals; and chemical products. The three industries reporting contraction in February were apparel, leather and allied products; petroleum and coal products; and miscellaneous manufacturing.

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