S&P Global Says Manufacturing Growth Accelerated In February

A measure of factory activity in the U.S. shows conditions improved in February at the fastest pace in a year and a half.

S&P Global’s purchasing managers index rose to 52.2 as the sector’s overall rate of growth was the fastest since July 2022, boosted by a renewed increase in production and a quicker rise in new orders.

That was higher than the earlier released “flash” estimate and above Wall Street’s expectations.

Demand from both domestic and foreign customers increased in the month, S&P Global said, driving sales up at the fastest pace since May of 2022.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said:

“Manufacturing is showing encouraging signs of pulling out of the malaise that has dogged the goods-producing sector over much of the past two years. After a long spell of reducing inventories in order to cut costs, factories are now increasingly rebuilding warehouse stock levels, driving up demand for inputs and pushing production higher at a pace not seen since early 2022. There are also signs of stronger demand for consumer goods, linked in part to signs of the cost of living crisis easing.

Firms are consequently investing in more staff and more equipment, laying the foundations of further production gains in the coming months to hopefully drive a stronger and more sustainable recovery of the manufacturing economy.

Problems with shipping disruptions and supply chains earlier in the year have eased, taking some pressure off input prices, though factory gate prices are recovering amid stronger customer demand, which will be an area to watch closely in the coming months as policymakers assess the appropriateness and timing of any interest rate cuts.”

A separate measure of the sector, from the Institute of Supply Management, went the other way, indicating softening demand.

The two measures can differ because of differences in the companies surveyed. The S&P Global PMI is more focussed on smaller companies with less global exposure. As a result, the ISM weakness may reflect softness in non-U.S. economies.