On Friday, data released by ISM showed that the U.S. ISM manufacturing index unexpectedly accelerated its contraction in February, with new orders, employment and other sub-indicators all falling into contraction. However, the final value of the Markit Manufacturing PMI in the United States in February was 52.2, setting a new high since July 2022. The difference between the two manufacturing PMI surveys was the largest in at least three years.

The U.S. ISM manufacturing index in February was 47.8, lower than the expected 49.5. The value before January was 49.1. In January, the ISM manufacturing index hit a 15-month high. 50 is the dividing line between prosperity and decline.

Important sub-indexes:

The new orders index was 49.2, compared with the previous value of 52.5, a decrease of 3.3 points in a single month. The new orders index posted its largest monthly gain in more than three years in January before retreating in February.

However, new export orders rose sharply, rising 6.4 points from 45.2 last month to 51.6 in February. This indicates that customers outside the United States are increasing.

The production index was 48.4, down 2 points in a single month and hitting the lowest level since July last year. The production index expanded for the first time in four months in January, but fell into recession again in February.

The employment index was 45.9, the lowest since July last year. The previous value was 47.1, a drop of 1.2 points in a single month. In recent months, the overall employment sub-index has been in a downturn.

The price payment index was 52.5, compared with the expected 53.2 and the previous value of 52.9. Price pressures have eased compared with January. In January, the price index increased by 7.7 points in a single month and entered an expansion range.

The inventory indicator fell 0.9 points in a single month to 45.3, indicating that the inventory shrinkage is accelerating and that corporate inventory levels are low. The customer inventory indicator rose by 2.1 points in a single month to 45.8, but is still in a contraction trend.

Eight manufacturing sectors posted growth in February, led by apparel, non-metallic minerals and primary metals. Seven industries reported declines, including furniture, machinery and wood products.

Timothy Fiore, chairman of the ISM Manufacturing Business Survey Committee, said in a statement:

Demand is in the early stages of recovery and production execution is relatively stable compared with January as companies begin to prepare for expansion. Suppliers still have capacity but are showing signs of struggling, in part because of their raw material supply chains.

There is considerable confidence that the manufacturing sector will reach expansion territory in March or April after 16 months of contraction. Everything feels like it's going in the right direction. The first half is going to be a little bumpy, and this is one of them.

But some analysts are not as optimistic as Fiore. Some analysts say that the latest ISM manufacturing PMI data is a blow to U.S. procurement and supply management executives. They had previously been optimistic that the contraction of the U.S. manufacturing industry since the end of 2022 would come to an end and was in the process of expansion. edge. The February data means that the previous recovery in January was short-lived, and the manufacturing industry is still struggling to gain sufficient momentum.

After the ISM manufacturing data was released, the two-year U.S. Treasury yield plunged to a daily low, falling 5 basis points to below 4.58%. The overall decline fell by more than 4 basis points during the day. The U.S. 10-year Treasury bond yield fell about 0.6 basis points, approaching 4.24%. Before the release of ISM manufacturing data, it rose to above 4.29%, a new daily high.

The ISM Manufacturing PMI is inconsistent with the Markit Manufacturing PMI released earlier on the same day, which recorded a final value of 52.2 in February, a 19-month final high. The specific data are as follows:

The final value of the Markit Manufacturing PMI in the United States in February was 52.2, a new high since July 2022. It was expected to be 51.5, the initial value was 51.5, and it was 47.3 in the same period last year.

Among the sub-indexes, the final value of new orders in February was 54.5, a new high since May 2022 and expanding for the second consecutive month. It was 52.6 the previous month; the final value of the output sub-index in February hit a new high since May 2022. .

Chris Williamson, chief business economist at S&P Global Market Intelligence, said:

Manufacturing is showing encouraging signs that it is emerging from the downturn that has plagued the goods-producing industry for much of the past two years. After a long period of drawing down inventories to reduce costs, factories are now increasingly rebuilding warehouse stock levels, boosting demand for inputs and boosting output, which is at its highest level since early 2022. There are also signs of stronger demand for consumer goods, linked in part to signs that the cost-of-living crisis is easing.

As a result, companies are investing in more employees and more equipment to lay the foundation for further increases in production in the coming months, hoping to promote a stronger and more sustainable recovery in the manufacturing economy.

Transport disruptions and supply chain issues have eased earlier this year, taking pressure off input prices, although ex-works prices are recovering on strong customer demand and this will be an area to watch closely in the coming months as Policymakers use this to assess whether a rate cut is appropriate and when.

Regarding the huge difference between the ISM and Markit manufacturing PMIs, financial blog Zerohedge commented that this is the largest difference between the two types of manufacturing surveys in at least three years. S&P Global data showed manufacturing expansion reached its strongest level since June 2022, while ISM data showed that manufacturing has continued to contract over the past 16 months.