• Production & new orders weakness offset by slower product delivery speeds.

• Pricing power eases.

Activity in the factory slowed last month. The Institute for Supply Management (ISM) reported that its composite index of manufacturing sector activity for February declined to 50.1 after rising to 50.9 in January. These figures nevertheless remained above the dividing line between expansion and contraction in the manufacturing sector. A reading of 50.5 had been expected in the Action Economics Forecast Survey. During the last 15 years, there has been a 68% correlation between the composite index and the quarterly change in real GDP.

The easing in the composite index reflected declines in the new orders and production components, although at 50.3 the production series remained significantly improved from 44.8 in December. The jump in the supplier deliveries reading to 57.3 from 52.9 suggested the slowest speed of product deliveries since November 2018. The inventories component fell to the low end of its recent range.

The slight rise in the employment figure to 46.9, nevertheless, continued to reflect a decline in factory sector payrolls. Twelve percent (NSA) of factory sector payrolls increased while 19% declined. During the last 15 years, there has been an 80% correlation between the index and the m/m change in factory sector payrolls.

The prices paid series fell sharply to 45.9, its lowest level since October. Seventeen percent (NSA) of survey respondents reported higher prices while 25% reported declines.

Amongst other series in the survey, the imports figure plummeted to an expansion low. The export reading slipped to 51.2 (NSA), but remained up from 47.3 in December. The order backlog index surged to 50.3, its highest level since last March.

The ISM figures are diffusion indexes where a reading above 50 indicates expansion. The figures from the Institute for Supply Management can be found in Haver's USECON database; further detail is found in the SURVEYS database. The expectations number is available in Haver's AS1REPNA database.