The pace of manufacturing growth in February was slower than in the previous month and fell short of expectations according to today’s Report on Business from the Institute for Supply Management (ISM). Severe winter weather likely affected last month’s manufacturing performance. Therefore, next month’s March report will be critically important to determine if a slowdown is truly emerging for manufacturers.

On a positive note, increases in exports continue to help drive production gains, along with slower cutbacks of inventories. While the employment measure has remained above the growth threshold level of 50 for three consecutive months, it will have to remain at this level for at least several months before a widespread upturn in manufacturing employment can be expected. Looking ahead, hiring is likely to remain subdued until the second half of the year when a stronger expansion is expected as consumer and business confidence pick up.

From The Financial Post (Canada), “U.S. factory floor shows signs of life“:

Drew Greenblatt has added a couple of engineers, a robot and a third production schedule to meet the jump in demand from automakers, pharmaceutical companies and other customers who use his assembly-line baskets.

“Our guys are running overtime to keep pace with the backlog,” says Mr. Greenblatt, owner of Marlin Steel Wire Products in Baltimore.

The U.S. economic recovery is showing up in the unlikeliest of places — the U.S. factory floor.

The news peg is yesterday’s ISM’s manufacturing index, which climbed 3.1 points to 55.7 (vs. 53.3 consensus), with growth responding to the decline in inventories. From the Institute for Supply Managment, “October 2009 Manufacturing ISM Report On Business^®”:

 The report was issued today by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. “The manufacturing sector grew for the third consecutive month in October, and the rate of growth is the highest since April 2006 when the PMI registered 56 percent. The jump in the index was driven by production and employment, with both registering significant gains. Production appears to be benefiting from the continuing strength in new orders, while the improvement in employment is due to some callbacks and opportunities for temporary workers. Overall, it appears that inventories are balanced and that manufacturing is in a sustainable recovery mode.”

See earlier post by NAM’s chief economist, Dave Huether.

From Reuters, reporting on the ISM’s report showing an expansion of manufacturing in August for the first time in 18 months, “U.S. manufacturing in recovery mode, demand a worry“:

While the recession in the broader economy may well be over, unemployment is likely to continue to mount for several months, adding to the stress in household finances and undercutting consumer spending, usually the main driver of the economy.

“Recovery is going to be modest for the next half year. I don’t think you will see an upturn in consumer spending until the labor market recovers, which will be sometime mid-next year,” said David Huether, chief economist at the National Association of Manufacturers.

New York Times, “Manufacturing Grows After 18 Weak Month“:

Companies that make textiles, paper products, computers and electronics, appliances and chemicals were among 11 industry groups that said their business had grown in August. They said new orders were flowing in, production was ticking up and their prices were rising. “It is a big deal,” said John E. Silvia, chief economist at Wells Fargo. “It does suggest that manufacturing is recovering.”

Traveling across the country Saturday, we had the opportunity to read local newspaper stories reacting to the ISM’s December Manufacturing Report. Grim.

AP national story, and the New York Times writes, “Manufacturing Reports Show Depth of Global Downturn.” Grim.

Creighton University’s Ernie Goss uses the ISM methodology to rank the economies midwestern states, so here’s that story, “Survey: Recession will worsen in the months ahead,” and the sidebar,”Mid-America survey state-by-state glance.” Grim.

But then, instead of grimmer, a glimmer. From the New York Times, “Some Forecasters See a Fast Economic Recovery“:

In the midst of the deepest recession in the experience of most Americans, many professional forecasters are optimistically heading into the new year declaring that the worst may soon be over.

For this rosy picture to play out, they are counting on the Obama administration and Congress to come through with a substantial stimulus package, at least $675 billion over two years.

They say that will get the economy moving again in the face of persistently weak spending by consumers and businesses, not to mention banks that are reluctant to extend credit.

Even with the conditions, we’ll take the offering of optimism.

A glum-inducing report from CNN, “Manufacturing activity at 26-year low“:

NEW YORK (CNNMoney.com) — A key index of the nation’s manufacturing activity fell to a 26-year low, sliding into recession territory, according to a purchasing managers group.

The Institute for Supply Management’s (ISM) said Monday that its manufacturing index tumbled to 38.9 in October from 43.5 in September. It was the lowest reading since September 1982, when the index registered 38.8.

The ISM summary is available here. But the section, “What Respondents are Saying” isn’t so dour:

• “Credit market causing suppliers to run closer on terms.” (Food, Beverage & Tobacco Products)
• “Appear to be bouncing along the bottom — volume is good but pricing is tough.” (Primary Metals)
• “Although the volume was down compared to last month, the volume was still higher than last year at the same time.” (Chemical Products)
• “Hurricane in Houston disrupted production for 10 days at our plant.” (Fabricated Metal Products)
• “Delivery issues continue across our range of purchased commodities as suppliers trim inventory commitments.” (Electrical Equipment, Appliances & Components)