Survey: US Manufacturing Slower in February

US manufacturing activity continued to expand but at a slower pace in February, as measures of output and employment fell, according to a survey released Friday.

The slowing echoes other data indicating the US economy may have peaked last year, and will settle in at a lower growth rate this year, even as the White House continues to forecast three percent expansion.

The closely-watched manufacturing index fell 2.4 points to 54.2, its lowest level since November 2016, the Institute for Supply Management said in its monthly report. The decline was driven by the production index which fell 5.7 points to 54.8, as new orders and employment also dropped. Any reading above 50 percent indicates growth, and US manufacturing has now grown without interruption for 30 months.

ISM’s manufacturing survey chief Timothy Fiore said comments from company officials indicated continued business strength “supported by notable demand and output, although both were softer than the prior month.” But output “was not able to keep pace with customer-inventory demand,” he said in a statement.

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In addition, “Weather conditions causing factory shutdowns may have contributed to the weaker expansion performance.” But economists reading the data were more pessimistic. “This is a grim report with few redeeming features,” said Ian Shepherdson of Pantheon Macroeconomics. “The bigger story here is that US manufacturing is being pulled into the mire by the rollover in Chinese manufacturing, which is not over yet,” he wrote in a note to clients.

The report reflected concerns about the US-China trade confrontation, and the prospect for new tariff increases. However, the survey may not have fully captured the comments from President Donald Trump and other officials in the past week saying a deal was close and suspending further punitive duties. Prices for aluminum and steel — which had been ramping up due to US tariffs — declined in the month, Fiore said. “Steel prices have returned to more normal levels,” he added. And while most comments indicated solid domestic demand, despite slowing in recent weeks, one said, “We are concerned about indicators showing a slight recession for the second half of the calendar year.