ISM data for February was expected to fall from 35.6 to 33.8, but in a surprise move the indicator rose slightly to 35.8. The slight rise does little to change the fact that US manufacturers continue to face severe pressure as slowdown in demand and high inventories force firms to continue layoffs and price cuts to remain competitive. Contraction now continues for a 13th month as the US faces a recession that may ultimately prove greater than any suffered since the post-war period. While the ISM data shows that we remain well under the 19 consecutive contractions seen in the early 1980s, there is still no clear sign of significant improvement in the economy. Also released in the report, the Prices Paid index remained at 29 in February while a rise to 33.5 had been expected by economists surveyed. Manufacturers continue to pay lower prices as demand slumps and commodity prices remain at multi-year lows. The recently passed stimulus bill and other efforts to improve housing and financial sectors may ultimately help the index to rise in the coming months, though continued contraction is still to be expected as recession continues.
