February Purchasing Managers Index Still Weak - IHS Global Insight Commentary

“Chronic weakness in manufacturing, as represented by the ISM-Manufacturing Purchasing Managers Index (PMI), is starting to become monotonous. The ISM, a monthly survey of the nation’s purchasing managers published monthly by the Institute for Supply Management, Tempe, Ariz.,  bounced up 1.3 points to 49.5 in February but scored a fifth consecutive month under 50, the dividing line between growth and contraction.
“Orders and production have not done badly in early 2016 and both held over 50, albeit not much over 50.  The almost-decent orders and production readings are not quite as good as they look on the surface, as backlog (unfilled orders) sank for a ninth consecutive month.  Inventories, employment and vendor performance remained below 50 for a ninth consecutive month and for the eleventh time in the past twelve months; the short term is living off of its seed corn.
“The PMI is not, and has not been, describing a full-blown recession, but what has been a nasty spot. Full manufacturing recessions are multi-car pileups and this period has been a bad fender-bender. Fender-benders are not bad for all parts of the car, but they are severe for the fender, its shock absorbers, and the nearby sides of the vehicle. With weak imports and lost foreign sales from a strong dollar being compounded by an inventory adjustment, the materials producers are the fender, exporters are the sides of the vehicle, and the transportation system is the shock absorbing system.
“Damage to transportation is often forgotten when talking about manufacturing, but one mode or another moves the raw materials, components, semi-finished parts, and finished goods back and forth multiple times in the supply chain. Construction supplies and motor vehicles are on the opposite side of the vehicle and partly compensate in industry aggregates, but a bad fender-bender is acutely and painfully felt by the fender and anything near it. The bad news is that this is all happening in slow-motion and is not over yet. It does not appear that the bad news will end before midyear and only then can repairs be made to the damaged parts.”