ISM index hits 61.4%, highest level in almost seven years
By Jeffry Bartash, MarketWatch
WASHINGTON (MarketWatch) — American manufacturers expanded in February at the fastest pace since 2004, according to a closely followed index released Tuesday.
The Institute for Supply Management said its manufacturing gauge rose to 61.4% in February from 60.8% in the prior month. Any reading over 50 indicates that more manufacturers are expanding instead of shrinking.
The manufacturing sector has now grown 19 straight months, outshining most other U.S. industries during that time. In 2010, the sector even gained jobs for the first time since 1997.
Economists surveyed by MarketWatch had forecast the index to edge up to 61%. See MarketWatch’s economic calendar.
U.S. stocks remained mixed after the ISM report, as investors digested the latest economic forecast by Federal Reserve Chairman Ben Bernanke and kept a close eye on rising oil prices.
Manufacturing details
The institute asks about 350 purchasing managers if their business got better or worse this past month. These senior executives are involved in all sorts of decisions, including hiring, the purchase of raw materials, the delivery of supplies, and the management of inventories.
Fourteen of 18 industries tracked by Tempe, Ariz.-based ISM expanded in February, spearheaded by apparel, oil and coal, and transportation. Read the press release on the ISM website.
The index for new orders, which is a strong indicator of future sales, rose to 68% from 67.8%.
Production also increased, up to 66.3% from 63.5% the prior month.
The inventories index, meanwhile, fell to 48.8% from 52.4%, which is usually a sign of improved sales. Companies tend to draw down inventory in a recovery when demand for their products is higher than they expect.
What’s more, the backlog of orders rose to 59% from 58.0%. Backlogs tend to rise as demand increases.
The employment index, meanwhile, jumped to 64.5% from 61.7% in January.
On Friday, the government will report on nonfarm payrolls and the nation’s unemployment rate for February
Economists surveyed by MarketWatch are looking for payrolls to rise 200,000 after having added 36,000 jobs in January. The jobless rate is seen ticking up to 9.1% from 9.0%.
