The Institute for Supply Management (ISM) said that growth in manufacturing activity has continued to slow over the past few months, starting 2015 off on a weaker note. The headline purchasing managers’ index (PMI) has fallen from 57.9 in October to 52.9 in February, its slowest pace since January 2014, when severe winter storms dampened activity across-the-board. The sample comments suggest that the West Coast ports slowdown and falling energy prices were top-of-mind for many of the respondents, helping to explain much of this easing. At the same time, the stronger U.S. dollar and sluggish growth abroad were also likely factors, with export orders (down from 49.5 to 48.5) declining for the second straight month.
Other measures of activity reflected this decelerated growth, including new orders (down from 52.9 to 52.5), production (down from 56.5 to 53.7) and employment (down from 54.1 to 51.4). The good news was that these figures continue to indicate modest growth overall despite some easing in recent months. Reduced pricing pressures have also helped, with sharply lower energy costs keeping overall raw material prices (unchanged at 35) in negative territory for four consecutive months.
In conclusion, manufacturers have been challenged on a number of fronts recently, dampening demand and production. Yet, they remain mostly optimistic about the coming months, and to the extent that the West Coast ports slowdown has been a factor, the recent agreement to settle this issue should be helpful moving forward. Still, we would like to see a faster pace of growth for manufacturing orders and output in the coming months, and for that, business leaders need our policymakers to enact pro-growth measures that facilitate more growth and reduce uncertainties in the marketplace.
Chad Moutray is the chief economist, National Association of Manufacturers.
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