U.S. Manufacturing Sector Holds Up at High Expansion Levels in February -- IHS Markit

By Xavier Fontdegloria

U.S. manufacturing activity continued to grow at a robust pace in February supported by sharp increases in output and new orders, data from a survey compiled by IHS Markit showed Monday.

The final reading for the U.S. Manufacturing Business Activity PMI Index for February came in at 58.6, marginally up from the preliminary figure of 58.5, but slipping from the 59.2 record-high registered in January.

Economists polled by The Wall Street Journal expected the indicator to be unchanged from its preliminary reading. The improvement in the health of the manufacturing sector was the second-strongest in almost 11 years, IHS Markit said.

February PMI shows that manufacturing activity in the U.S. grew for the eighth consecutive month as a level above 50 indicates expansion, and that the pace of growth for factory activity remained high but eased somewhat compared with that of January.

Rates of expansion in output and new orders remained sharp in February. The rate of production growth was among the fastest in six years while new order growth was among the fastest seen over the past three years. New export orders also rose solidly, registering the second-steepest gain since September 2014, the report said.

"Another month of strong production growth suggests that the U.S. manufacturing sector is close to fully recovering the output lost to the pandemic last year, and a renewed surge in optimism suggests the recovery has much further to run," Chris Williamson, chief business economist at IHS Markit, said.

Unprecedented supply chain disruption remained apparent, however, with supplier shortages and transportation delays leading to a substantial rise in input costs.

Also helping to buoy the headline PMI figure was a substantial lengthening of supplier delivery times amid significant supply chain disruption, with longer lead times for inputs reportedly stemming from supplier shortages and transportation delays due to Covid-19 restrictions, the report said.

Goods producers registered a severe uptick in cost burdens. The rate of input price inflation accelerated to the sharpest since April 2011. The recent strengthening of demand allowed firms to partially pass on higher costs to clients.

"A concern is that shortages of raw materials have become a growing problem, with record supply chain delays reported in February, contributing to the steepest rise in material costs seen over the past decade," Mr. Williamson said.

Prices charged for a wide variety of goods coming out of factories are consequently rising, which will likely feed through to higher consumer inflation, he said.

Write to Xavier Fontdegloria at [e-mail]

(END) Dow Jones Newswires

03-01-21 1020ET