Economic activity in the US manufacturing sector contracted in February for the fourth consecutive month, according to the Institute for Supply Management’s Manufacturing ISM Report on Business, released today.

The Manufacturing PMI improved marginally and registered a reading of 47.7% in February, 0.3 of a percentage point higher than January's reading of 47.4%.

The reading indicates the economy as a whole has contracted for the third month after a 30-month period of expansion. Manufacturing PMI readings above 50% indicate the manufacturing economy is expanding.

ISM noted the Manufacturing PMI has been at its lowest levels since May 2020.

“The US manufacturing sector again contracted, with the Manufacturing PMI improving marginally over the previous month,” said Timothy Fiore, chair of the Institute for Supply Management Manufacturing Business Survey Committee.

“With Business Survey Committee panelists reporting softening new order rates over the previous nine months, the February composite index reading reflects companies continuing to slow outputs to better match demand for the first half of 2023 and prepare for growth in the second half of the year.”

In addition, the employment index fell to a reading of 49.1% in February from 50.6% in January. It indicates employment contracted after weak expansion in the previous two months and contraction in the three months before.

Fiore noted that although optimism for the second half of the year is slightly lower than in January, panelists’ companies continue to indicate that they will not substantially reduce head count.

The Manufacturing PMI is based on data compiled from purchasing and supply executives across the US.