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Apparel and Textiles Led February’s US Manufacturing Gains

With a strong performance from apparel and textiles, economic activity in the U.S. manufacturing sector grew in February, the nation’s supply executives said in the latest “Report On Business” from the Institute for Supply Management (ISM) released on Tuesday.

“The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment,” Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee, said. “The Covid-19 omicron variant remained an impact in February, however, there were signs of relief, with recovery expected in March. Panel sentiment remained strongly optimistic, with 12 positive growth comments for every cautious comment, up from January’s ratio of 7-to-1…Production expanded satisfactorily, despite staffing and supplier delivery headwinds.”

The Manufacturing Purchasing Manager’s Index (PMI) registered 58.6 percent compared to the January reading of 57.6 percent. A Manufacturing PMI above 48.7 percent, over a period of time, generally indicates an expansion of the overall economy, meaning February’s Manufacturing PMI indicates the overall economy grew for the 21st consecutive month following contraction in April and May 2020.

The 16 manufacturing industries reporting growth in February were led by apparel, leather and allied products and textile mills, and included furniture and related products.

ISM’s New Orders Index registered 61.7 percent in February, an increase of 3.8 percent from January. A New Orders Index above 52.9 percent is generally consistent with an increase in the Census Bureau’s series on manufacturing orders.

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“Accelerated new orders growth returned to the manufacturing community, as new export orders expansion increased and panelists responded to longer lead times and the potential for additional pricing instability,” Fiore said.

Apparel, leather and allied products also topped the 13 sectors that reported growth in new orders in February, which also included textile mills.

The Production Index registered 58.5 percent in February, 0.7 percent  higher than January. An index above 52.4 percent is usually consistent with an increase in the Federal Reserve Board’s Industrial Production figures.

“As expected, panelists indicated that Omicron-related labor and material shortages contributed to difficulties in executing manufacturing plans in January and February,” Fiore said. “Improvement in consumption is expected in March as the Covid-19 wave continues to pass.”

The two industries reporting a decrease in February included furniture and related products, while textile mills and apparel, leather and Allied products reported no change in production .

ISM’s Employment Index registered 52.9 percent in February, down 1.6 percent from January. An Employment Index above 50.5 percent is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

“The index reported a sixth consecutive month of expansion,” Fiore said. “Survey panelists’ companies are still struggling to meet labor management plans, as there were signs of slowing progress compared to prior months–a smaller share of comments noted greater hiring ease. An overwhelming majority of panelists again indicate their companies are increasing head counts or attempting to, as 90 percent of Employment Index comments were hiring focused. Among those respondents, 34 percent expressed difficulty in filling positions, up from 31 percent in January. Turnover rates remained elevated, continuing a trend that began in August.”

Of 18 manufacturing industries, 10 industries reported employment growth in February, led by apparel, leather a and allied products, and including furniture and related products.

The delivery performance of suppliers to manufacturers was slower in February, as the Supplier Deliveries Index registered 66.1 percent, 1.5 percent higher than the 64.6 percent reported in January. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.

Fifteen of 18 industries reported slower supplier deliveries in February, including textile mills, furniture and related products.

The Inventories Index was 53.6 percent in February, 0.4 percent higher than the 53.2 percent reported for January. An Inventories Index greater than 44.4 percent usually indicates expansion in the Bureau of Economic Analysis (BEA) figures on overall manufacturing inventories.

“Manufacturing inventories are again climbing, as continued part shortages are evident in increased receipts of products from suppliers, expansion of work-in-process inventories to manage absorption and some cases of increased finished-goods inventory as supply chain partners underperform,” Fiore said. “Manufacturing inventories will continue to expand throughout the first half of 2022 as these conditions persist into the summer.”

Apparel, leather and allied products, and textile mills topped the 12 industries, including furniture and related products, reporting higher inventories in February.

ISM’s Customers’ Inventories Index increased 1.2 percent to 31.8 percent in February, indicating that customers’ inventory levels were considered too low, “a positive for future production growth,” Fiore said.

No industries reported higher customers’ inventories in February. The 16 industries reporting customers’ inventories as too low during February were led by textile mills and included furniture and related products.

The ISM Prices Index fell 0.5 percent to 75.6 percent in the month, indicating raw materials prices increased for the 21st consecutive month, but at a slightly slower rate in February. A Prices Index above 52.6 percent is generally consistent with an increase in the BLS Producer Price Index for Intermediate Materials.

In February, 17 industries reported paying increased prices for raw materials, including textile mills, and furniture and related products. No industry reported paying lower prices for raw materials.

ISM’s Backlog of Orders Index was 65 percent in February, up 8.6 percent and indicating order backlogs expanded for the 20th straight month.

“This is the largest positive change in the Backlog of Orders Index since an increase of 10.8 percentage points in January 2011,” Fiore said.

The 14 industries reporting growth in order backlogs in February, topped by apparel, leather and allied products, Furniture and related products, and textile mills.

ISM’s New Export Orders Index registered 57.1 percent in February, up 3.4 percent. Textile mills led the nine industries reporting growth in new export orders in February.

ISM’s Imports Index hit 55.4 percent in February, an increase of 0.3 percent. The 10 industries reporting growth in imports in February were topped by furniture and related products.

“Imports expanded in February for the fourth consecutive month, despite continuing challenges with throughput at U.S. ports of entry,” Fiore added. “Overland transport challenges and container shortages persist as the Lunar New Year season passes. Indications of improvement in January dissipated in February–transportation labor issues resurfaced, causing the slowest imports growth since the index last contracted in October 2021. Imports will continue to be challenged through the first half of 2022, due to the pandemic.”