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Economists expected ISM manufacturing to improve to a nearly flat 49.5. Instead the index fell to 47.8 from 49.1.

ISM chart and excerpts below by permission from the Institute for Supply Management® ISM®

Please consider the February 2024 Manufacturing ISM^® Report On Business^® emphasis mine.

The U.S. manufacturing sector contracted in February, as the Manufacturing PMI^® registered 47.8 percent, down 1.3 percentage points compared to January’s reading of 49.1 percent.

“This is the 16th consecutive month of contraction. Four out of five subindexes that directly factor into the Manufacturing PMI^® are in contraction territory, up from three in January.

The New Orders Index dropped back into contraction territory after one month in expansion. Of the six biggest manufacturing industries, three (Fabricated Metal Products; Chemical Products; and Transportation Equipment) registered growth in February,” says  Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management^®.

A reading above 50 percent indicates that the manufacturing sector is generally expanding; below 50 percent indicates that it is generally contracting.

The ISM is a diffusion index. Direction is more important to the index than magnitude.

For example, if 25 companies reduced their workforce by 100 workers each, another 25 companies each hiring one person would offset.

+1 and -250 net to zero in a diffusion index.

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