Factories expand despite virus, though deliveries slow

American factories expanded in February for the second straight month, despite disruptions caused by the coronavirus outbreak. The winning streak, however, may prove short-lived.

The Institute for Supply Management, an association of purchasing managers, said Monday that its manufacturing index registered 50.1 last month. That is down from 50.9 in January. But anything above 50 signals growth.

The February reading was slightly lower than economists expected.

Fourteen of 18 manufacturing industries expanded in February, led by wood products and furniture manufacturers.

The institute’s index showed that American manufacturing contracted from August through December last year, hobbled by President Donald Trump’s trade wars, which raised costs and generated uncertainty about where to locate factories and buy supplies.

Much of China has been locked down because of the coronavirus, disrupting supply chains that many U.S. companies rely on.

In February, manufacturing production and new export orders grew. But new orders and hiring contracted in February.

Timothy Fiore, chair of the institute’s manufacturing survey committee, said factories were expanding but only “at a weak level.”

Economists Oren Klachkin and Gregory Daco of Oxford Economics predicted that the February expansion would prove “a last gasp” before the index returns to negative.

Jim Bianco, head of his own financial research firm, attributed the February growth to “a statistical quirk” in a tweet. Deliveries from suppliers slowed sharply — normally a good sign that the economy is booming and factories are straining to keep up – but now evidence of clogged up supply chains.

“Suppliers are having more difficulty delivering,” Fiore said, adding “This could easily have been a contraction month.”