The Institute for Supply Management (ISM) today reported that manufacturing is now expanding at the fastest rate in nearly 14 years. The ISM Manufacturing Purchasing Managers’ Index (PMI) rose from 59.1 in January to 60.8 in February, the highest level since May 2004. Given the strength of that headline figure, it should not be a surprise that many of the underlying data points are near or exceed 60, which would indicate robust growth for the month. This included new orders (down from 65.4 to 64.2), production (down from 64.5 to 62.0), employment (up from 54.2 to 59.7) and exports (up from 56.2 to 59.8). Regarding the latter number, exports once again expanded at their best rate since April 2011, with international sales helping to fuel stronger overall demand.
The sample comments tended to echo those findings, with healthy gains in demand, production and hiring and a very optimistic outlook for the coming months. Tax reform was seen by one respondent as “making a difference” for their business, spurring more capital spending on equipment, among other things. In addition, several of those completing the latest ISM survey noted the inability to attract and retain workers, with the labor market continuing to tighten. Meanwhile, prices for raw materials (up from 72.7 to 74.2) have remained highly elevated, with the measure at a level not seen since May 2011. This reflects a rebound in some commodity costs, even as overall pricing pressures continue to be largely under control, at least for now. In other news, inventories (up from 52.3 to 56.7) also accelerated in February for the second straight month, rising to its highest point since March 2010. More than anything, the uptick in inventories is consistent with the healthy growth in overall production.
This all comes on the heels of a report in January showing that the manufacturing sector now contributes a whopping $2.25 trillion to the American economy — the highest level ever and up nearly one-third (32.5 percent) since the Great Recession. Fittingly, we learned that last statistic on the eve of President Trump’s one-year anniversary in office. Indeed, the enactment of historic tax reform, significant regulatory relief and the overall shift to a more pro-business environment under the current political leadership in Congress and the White House is clearly resulting in tangible benefits for manufacturers and manufacturing workers. Now, in order to sustain that momentum, Washington needs to keep up the pace with policies like continued regulatory reform, smart trade polices and — importantly — necessary investments in infrastructure.