Growth in southeastern Wisconsin’s manufacturing sector made its largest improvement in February since the initial COVID-19 shutdown period, but respondents to the Marquette-ISM Report on Manufacturing continued to highlight issues in supply chains, inflation and labor.
The report’s Milwaukee-area PMI climbed to 60.72 in February, a nearly 8-point jump from January. Any reading above 50 indicates the region’s manufacturing sector is growing. The February reading is the best since June 2021.
The index has been trending downward over the past seven months as manufacturers deal with supply chain issues brought on by a mix of higher demand and a variety of disruptions, price inflation and labor shortages from both COVID-19 and a tight labor market.
Respondents did say product supplies are increasing in some industries and some businesses are seeing lead times decrease. But respondents also said the supply chain system still needs to improve, product demand remains high, transportation costs are up and prices for goods and services continue to increase. They also said the shortage of semiconductors remains an issue.
Within the report, the index tracking employment saw one of the strongest gains, increasing nearly 16 points to 64 while exports increased 19 points to almost 78 and order backlogs increased 10 points to nearly 67.
Inventories continued to decline, but did jump almost 9 points to nearly swing to growth at 48.7.
New orders did swing to growth with a 2.6-point increase to 51.5 and production showed an almost 6-point improvement and continued growth at 58.5.
The outlook for the next six months also continued to show improvement with the diffusion index, which attempts to balance positive and negative bias, growing from 44.1% in December to 46.7% in January and now 50% in February.
The improvement from January was the result of a shift in respondents from expecting things to stay the same to expecting an improvement. In January, 26.7% expected things to get better over the next six months, a figure that climbed to 33.3% in February while the percentage expecting things to remain the same dropped from 40% to 33.3%.
The percentage expecting conditions to worsen was unchanged at 33.3%.