Manufacturing in the U.S. was contracting for the latter half of 2019 and bounced back last month. February is the second month in a row that U.S. manufacturing expanded based on the ISM Manufacturing Purchasing Managers Index (PMI). The current PMI is over 50 at a value of 50.1 in February 2020. A value over 50 indicates expansion. Notably, the PMI value was over 60 until Fall of 2018, when it dropped precipitously. The current two months of readings are a positive sign that the manufacturing in the U.S. is recovering after a weak 2019. But February brought a new challenge for manufacturers, which is the effect of coronavirus on the manufacturing supply chain and demand.
Most Manufacturing Industries Are Growing Now, But Before The Coronavirus
Recent ISM reports have indicated that the slowdown in U.S. manufacturing has been broad and across various manufacturing industries. But in January 2020, some industries have rebounded. This rebound continued into February, and now 14 out of the 18 industries reported growth. Listed in order, these are Wood Products; Furniture & Related Products; Plastics & Rubber Products; Printing & Related Support Activities; Paper Products; Textile Mills; Primary Metals; Food, Beverage & Tobacco Products; Computer & Electronic Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Machinery; and Chemical Products.
Only three industries were contracting in February. Listed in order, these are Petroleum & Coal Products; Transportation Equipment; and Nonmetallic Mineral Products. This is not surprising, as energy, mining, and trucking continue to be in the doldrums.
As one can see from the chart below, the sub-indices for the PMI look much better than the end of 2019 for the second straight month. But with that said, there was weakening in February compared to January. In particular, employment and inventories continue to exhibit weakness. Seemingly, the euphoria from the so-called “Phase I” trade deal between the U.S. and China was transitory. The large decline in imports in February was surprising, and possibly points to the effect of the coronavirus on manufacturing and halt of Boeing 737 Max (BA) production…
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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.