Private manufacturing construction rose to record levels in January, according to the U.S. Census Bureau, while the ISM® Manufacturing Purchasing Managers’ Index® showed solid growth in February. NAM Chief Economist Chad Moutray broke it down for us.
Record construction: “Private manufacturing construction spending jumped 8.5% from $85.59 billion in December to a record $92.86 billion in January,” said Moutray. “Private construction activity in the sector has trended strongly higher since bottoming out at $65.92 billion in December 2020, and over the past 12 months, activity has soared 31.2%. These data speak to the strength of the manufacturing sector and the need to increase capacity to meet very robust demand.”
The details: “Total private nonresidential construction spending increased 1.8% in January, with activity rising 7.3% over the past 12 months,” said Moutray. “In addition, total private construction spending rose 1.5% for the month, with a 1.3% gain seen for private residential construction. Private single-family construction increased 1.2% for the month, but private multifamily activity edged down by 0.1%. Overall, total private construction has soared 11.0% since January 2021, with private residential activity up 13.4%. Meanwhile, public construction spending increased 0.6% in January, but with activity down 1.3% year-over-year.”
The index: “Manufacturers reported solid growth in February, with the sector continuing to be resilient despite ongoing supply chain, workforce and cost pressures in the economy,” said Moutray. “The ISM® Manufacturing Purchasing Managers’ Index® rose from 57.6 in January to 58.6 in February, led by strength in new orders (up from 57.9 to 61.7), which grew at the fastest pace in five months. Production (up from 57.8 to 58.5), inventories (up from 53.2 to 53.6) and exports (up from 53.7 to 57.1) also improved, with the latter expanding at a 12-month high. Hiring (down from 54.5 to 52.9) slowed in February but has increased for six straight months.”
Inflation watch: “Cost pressures continued to be highly elevated, but with the index for prices declining from 76.1 in January to 75.6 in February,” said Moutray. “This measure peaked at 92.1 in June, when price growth was the fastest since July 1979. However, it continues to expand at an extraordinary pace. Inflation remained the number-one concern in the most recent NAM Manufacturers’ Outlook Survey.”
Backlogs continue: “The index for supplier deliveries (up from 64.6 to 66.1) increased for the month,” said Moutray, “suggesting that wait times were somewhat longer in February. (Readings over 50 are consistent with slower deliveries.) These data reflect long wait times for deliveries, consistent with the supply chain challenges seen over much of the past year.”