US manufacturing sector extends slump in February

WASHINGTON: Manufacturing activity in the United States contracted for a fourth consecutive month in February, despite logging a slight improvement from the month prior, survey data showed on Wednesday.

The Institute for Supply Management’s (ISM) manufacturing index ticked up slightly to 47.7 percent last month, from 47.4 percent in January.

This was similar to analysts’ expectations, and comes as the Federal Reserve pushes on with its battle against inflation.

The Fed has raised the benchmark lending rate multiple times in the past year to cool demand and rein in costs, although some segments of the economy have proven more resilient than expected.

“In the last two months, the Manufacturing (Purchasing Managers’ Index) has been at its lowest levels since May 2020, when it registered 43.5 percent,” said ISM manufacturing survey chair Timothy Fiore in a statement.

New orders remained weak while the production index slipped as well from January, according to the latest report.

With reports of “softening new order rates over the previous nine months, the February composite index reading reflects companies continuing to slow outputs to better match demand for the first half of 2023 and prepare for growth in the second half of the year,” said Fiore.

While some respondents to the ISM survey reported a good start to the year, others noted a slowdown in construction of new housing and worries over a slowing economy have customers delaying purchases.

Meanwhile, a transportation equipment firm said that although sales remained solid, “There is concern for the global supply chain now that we are restricting sales of some semiconductors to China.

“Manufacturing faces headwinds from slowing demand as well as rising borrowing costs,” said Rubeela Farooqi, chief US economist at High Frequency Economics.

“But a better global economic backdrop coupled with an onshoring of supply networks and investment in domestic manufacturing capacity could provide support to factory activity going forward,” she said.