The U.S. manufacturing sector expanded at its second fastest rate in nearly 17 years in February, according to new data from the Institute for Supply Management.

ISM’s closely watched monthly index gauging manufacturing activity soared to a reading of 60.8 last month. Readings above 50 indicate expansion. The last time the index was as high as last month’s score was in February 2018, when it also tallied 60.8. Those readings, determined by a survey of manufacturing purchasing managers, tie for the second highest since May 2004, when the index reached 61.4.

February 2021’s reading was up 2.1 percentage points from January. Five of the top six manufacturing industries reported moderate to strong expansion, ISM noted. Overall demand expanded, with the new orders component of the survey registering 64.8, up 3.7 percentage points from the January reading of 61.1. Similarly, the production subindex registered 63.2, an increase of 2.5 percentage points from the month prior.

Notably, the survey found optimism increasing with five positive comments for every cautious comment, up from a 3-1 ratio in the January survey.

The Institute for Supply Management® reported that manufacturing activity expanded at the fastest pace in three years, with the headline index up from 58.7 in January to 60.8 in February. pic.twitter.com/YsYof3xoqF

— Chad Moutray (@chadmoutray) March 1, 2021

Timothy Fiore, who spearheads the ISM manufacturing study, said that issues with absenteeism, short-term shutdowns to sanitize facilities as a result of COVID concerns, and difficulties in hiring workers remain challenges and continue to cause strains that limit manufacturing’s growth potential.

“Manufacturing performed well for the ninth straight month, with demand, consumption and inputs registering strong growth compared to January,” said Fiore. “Labor-market difficulties at panelists’ companies and their suppliers continued to restrict manufacturing-economy expansion and will remain the primary headwind to production growth until employment levels and factory operations can return to normal across the entire supply chain.”

Promotional products distributors can potentially help manufacturing clients with issues related to bringing aboard and keeping quality employees. Human resources departments at manufacturers could be receptive to promo-driven solutions that help with hiring and retention.

Distributors planning to prospect for such business should note that 16 of the 18 manufacturing industries reported growth in February.

Manufacturing industries that experienced growth (in order) were: textile mills; electrical equipment, appliances and components; primary metals; paper products; chemical products; machinery; fabricated metal products; transportation equipment; wood products; plastics and rubber products; computer and electronic products; apparel, leather and allied products; food, beverage and tobacco products; miscellaneous manufacturing; furniture and related products; and nonmetallic mineral products. The two industries reporting contraction in February were printing and related support activities, and petroleum and coal products.

Meanwhile, the U.S. services sector marked a ninth straight month of expansion in February, though growth slowed from the month prior, according to the Services ISM Report on Business, another monthly ISM survey that’s closely watched by economists.

An unexpected downtick for ISM Services; headline at 55.3 vs. 58.7 est./in prior month; new orders slowed considerably (barely expanding), imports down along with employment, while backlogs ticked up … prices paid at highest since 2008 pic.twitter.com/TUlmX2lSax

— Liz Ann Sonders (@LizAnnSonders) March 3, 2021

The Services Purchasing Managers Index tallied 55.3 for February. That was down 3.4 percentage points from the near-two-year high experienced in January, but the tally remained above the reading of 50 necessary to denote economic expansion in the sector.

In February, rising prices, logistical hurdles and an outbreak of business-halting severe winter weather across large swaths of the United States, including extended weather-related power outages in Texas that affected promo too, contributed to the slowdown. Similar to manufacturing, supply challenges and labor constraints could continue to be barriers to greater growth, but a number of analysts believe the slowdown that services experienced in February will be short-lived.

“In a sign the slowdown in services activity is temporary, the ISM index of order backlogs rose to a six-month high of 55.2, while a gauge of export demand was the strongest since June,” Bloomberg noted.

Respondents to the Services ISM survey are “are mostly optimistic about business recovery and the economy,” said Anthony Nieves, who leads the survey for ISM.

The 17 services industries reporting growth in February — listed in order — were: accommodation and food services; wholesale trade; transportation and warehousing; construction; arts, entertainment and recreation; public administration; utilities; healthcare and social assistance; retail trade; professional, scientific and technical services; finance and insurance; management of companies and support services; information; agriculture, forestry, fishing and hunting; educational services; other services; and mining. The only industry reporting contraction in February was real estate, rental and leasing.