A closely watched measure of U.S. manufacturing jumped to a three-year high in February but supply chain disruptions due to the COVID-19 pandemic are still constraining production growth.
The Institute for Supply Management said Monday its Purchasing Managers’ Index rose to 60.8 last month from 58.7 in January. After ninth straight monthly gains, the index is at its highest level since February 2018.
A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the U.S. economy. Economists polled by Reuters had forecast the index edging up to 58.8 in February.
“Manufacturing performed well for the ninth straight month, with demand, consumption and inputs registering strong growth compared to January,” Timothy Fiore, chair of the ISM’s Manufacturing Business Survey Committee, said in a news release.
As Reuters reports, the ISM survey is another indication of “strong economic performance early in the first quarter, thanks to nearly $900 billion in additional COVID-19 relief money from the government and a drop in new coronavirus infections and hospitalizations.”
“We are looking at an economy that is picking up steam,” said Joel Naroff, chief economist at Naroff Economics.
Manufacturing was driven in February by strong demand for goods such as electronics and furniture, as 23.2% of the labor force works from home because of the virus. Of the 18 manufacturing industries, 16 reported growth in February, with only printing and related support activities and petroleum and coal products showing contraction.
But survey respondents also said their suppliers were continuing to struggle, with deliveries slowing at a faster rate compared with January. The Supplier Deliveries Index registered 72.0, up 3.8 points from the January figure of 68.2 amid labor shortages at suppliers as the pandemic continues. (Reading above 50 indicate slowing deliveries.)
Electrical equipment, appliances, and components producers reported “wide-scale” shortages and described the situation as “out of control.”
“Manufacturing is doing well but it will not be smooth sailing over the next few months because of supply-chain disruptions, slow delivery times, and a global shortage of semiconductors,” said Ryan Sweet, a senior economist at Moody’s Analytics.
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