US manufacturing contracts further, rays of light on the horizon
By Lucia Mutikani
WASHINGTON (Reuters) -U.S. manufacturing slumped further in February, with a measure of factory employment falling to a seven-month low amid layoffs, but there were signs activity was on the cusp of rebounding.
The survey from the Institute for Supply Management on Friday showed customer inventories declining for a third straight month, which the ISM considered as positive for future new orders and production growth. Comments from manufacturers were also upbeat, with some saying «demand has finally picked up,» and others noting they were «experiencing increased sales.»
«We see some encouraging signs of life in manufacturing,» said Shannon Grein, an economist at Wells Fargo in Charlotte, North Carolina.
The ISM said its manufacturing PMI fell to 47.8 last month from 49.1 in January. It was the 16th straight month the PMI remained below 50, which indicates contraction in manufacturing. That is the longest such stretch since the period from August 2000 to January 2002.
Economists polled by Reuters had forecast the index edging up to 49.5. The share of PMI components with readings at or below 45, which is viewed as a good barometer of overall manufacturing weakness, was 1% last month compared to 27% and 48% in January and December respectively.
According to the ISM, a PMI reading below 42.5 over time indicates a contraction of the overall economy. That guidance has been revised down from 48.7. The economy continues to grow, expanding at a 3.2% annualized rate in the fourth quarter.
Though higher borrowing costs have cooled demand for goods and weighed on business investment on equipment, the ISM survey has painted an overly pessimistic picture of manufacturing, which accounts for 10.3% of the economy.
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