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Growth in the U.S. manufacturing sector unexpectedly slowed in February, after three consecutive monthly increases. The index fell from 54.1 to 52.4 in February, reversing around half of the gains of the previous three months. However, the decline in February does not raise any immediate concerns as the details of the report are not horrible. The ISM manufacturing index has remained above its expansionary threshold for 31 straight months.


New orders led the decline, falling to 54.9 from 57.6. The decline in new orders should be interpreted caully as new orders have recently been unstable.

Production and employment both declined in February to 55.3 and 53.2 respectively. February is the third consecutive decline in the employment index.

The inventories index remained constant at 49.5, below the contrationary level for the fifth consecutive month.

Exports orders continue to rise despite turmoil in Europe, climbing from 55.0 to 59.5 in February.

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The US foreign trade deficit dropped 3% in February to $43.0 billion. The decrease in the deficit is due solely to exports, which increased. Imports remained the same as the previous month.



Exports grew by 0.9% to $186.0 billion. Imports reported no change between January and February at $228.9 billion both months. The reduction in the deficit for February was caused primarily by a reduction in the petroleum deficit, which dropped $3.1 billion to $21.2 billion. The goods deficit also declined and the services surplus increased, also contributing to a lower deficit.

The real goods deficit, which is important for the calculation of GDP, shrank 1.5% to $47.4 billion.

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Consumer sentiment rose by 0.3 points in February to 75.3, as measured by the University of Michigan’s Consumer sentiment index. The reading is significantly higher than the preliminary February reading of 72.5, indicating sentiment improved in the second half of the month. February’s improvement makes the sixth straight improvement since the index hit record lows in August on stalled debt talks in Washington.


The improvement in the index was led entirely by the future expectations portion of the index, which improved to 70.3 from 69.1. The present conditions component of the index fell from 84.2 to 83.0.

Short term inflation expectations remained unchanged at 3.3% over one year. Long term expectations rose with 5-year inflation expectations rising from 2.7 to 2.9%.

Private sector employment increased by 198k jobs in February according to ADPs National Employment Report. Gains in February continued to be driven primarily by the service sector, however the goods sector made gains as well. Februarys gain is slightly lower than Januarys gain of 215k jobs, revised upward from an initially reported 192k jobs. Januarys ADP report translated into a gain of 157k jobs as reported by the BLS.



Keeping with recent trends, the majority of job creation in February came from the service sector, which created 164k jobs, down from 184k in January.

The goods producing sector picked up steam in January, adding 34k jobs, up from 31k the previous month. Much of this gain was driven by improvements in the manufacturing sector, which added 9K jobs. The goods sector has now seen employment gains for five consecutive months.

Read the ADP release.

Existing home sales fell by 0.9% to 4.59 million annual units in February. The decline is due to a strong upward revision in January’s sales, as February’s pace is stronger than January’s initially reported pace. January’s pace of home sales was revised up from 4.57 million units per year to 4.63 million. As a result, despite February’s slight decline, sales are running 4% faster in the three months ending February than the three months ending in November.


Months’ supply of homes on the market increased to 6.4 million however part of this increase was due to increased listings. The median house price appreciated in February by 0.3% versus a year ago to $156,600. After adjusting for seasonal factors the appreciation of prices was 1.6% from the previous month.

Read the report.