Fair to Middling for Manufacturing, Good News for the Services Sectors
Manufacturing fell to 52.4%, missing the consensus range of 54%-55.5% and the consensus point of 54.6%. Economists had predicted a rise in the index of 0.5 but got slack results in all the sub-indexes with new orders down 2.7, production down 0.4, employment down 1.1, supplier deliveries down 4.6, and inventories at break even. But according to Econoday, "February's rates are respectable and not that much different than January's." The most dramatic increase in the sub-indexes were found in prices, rising +6% to 61.5%. So the only good news was that the exports index was up +4.5% to 59.5%.
Non-Manufacturing ISM Report showed greater strength with the headline index rising 0.5% to 57.3% which was well above the consensus of 56% and on the high side of the consensus range of 54.5%-58%. Econoday's summary was a little more reasonable claiming that this report was "very positive." Although employment was down -1.7% to the still good level of 55.7% and supplier deliveries was down 1.5% to 49.5%, business activity jumped 3.1% to 62.6% and new orders continued its strong upward trend since October 2011 (52.4%) with an increase of +1.8% to 61.2%.
Déjà vu on prices and inflation concerns
Even though the manufacturing report showed weakness across the board, the price index and the number of commodities with rising prices did not subside last month. Below is a chart of the price indexes for both manufacturing and non-manufacturing from the Federal Reserve which shows a five-month trend upward for both sectors.
(Click charts to expand)
The following two charts also show recent upward trends from both reports for both total number of commodities rising in prices and multi-month commodities. It is not nearly as dire as the spring of 2011. These indexes are not seasonally adjusted so we can expect this recent trend to continue up.