TEMPE, Ariz. — Economic activity in the manufacturing sector expanded in February for the second straight month but only the third time in 40 months, say the nation's supply executives in the latest ISM Manufacturing PMI Report.
The report was issued Monday by Susan Spence, MBA, chair of the Institute for Supply Management Manufacturing Business Survey Committee.
"The Manufacturing PMI registered 52.4 percent in February, a 0.2-percentage point decrease compared to the reading of 52.6 in January. The overall economy continued in expansion for the 16th month. (A Manufacturing PMI above 47.5 percent, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index expanded for the second straight month after four straight readings in contraction, registering 55.8 percent, down 1.3 percentage points compared to January's figure of 57.1 percent. The February reading of the Production Index (53.5 percent) is 2.4 percentage points lower than January's reading of 55.9 percent. The Prices Index remained in expansion (or 'increasing' territory), registering 70.5 percent, an 11.5-percentage point jump from January's reading of 59 percent and its highest reading since June 2022 (78.5 percent). The Backlog of Orders Index registered 56.6 percent, up 5 percentage points compared to the 51.6 percent recorded in January and its highest reading since May 2022 (58.7 percent). The Employment Index registered 48.8 percent, up 0.7 percentage point from January's figure of 48.1 percent.
"The Supplier Deliveries Index indicated a further slowing for the third month in a row after one month in 'faster' territory. The reading of 55.1 percent is up 0.7 percentage point from the 54.4 percent recorded in January. (Supplier Deliveries is the only ISM PMI Reports index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.)
"The Inventories Index registered 48.8 percent, up 1.2 percentage points compared to January's reading of 47.6 percent. The Customers' Inventories Index reading of 38.8 percent is a 0.1-percentage point increase compared to January.
"The New Export Orders Index reading of 50.3 percent is 0.1 percentage point higher than the reading of 50.2 percent registered in January. The Imports Index registered 54.9 percent, 4.9 percentage points higher than January's reading of 50 percent and the highest since February 2022 (55.4 percent).
"In February, U.S. manufacturing activity remained in expansion territory, although growing at a slower pace than the month before. Of the five subindexes that make up the PMI, two (New Orders and Production) indicated slower growth compared to the previous month, and the Employment and Inventories indexes remained in contraction.
"Three demand indicators (the New Orders, Backlog of Orders and New Export Orders indexes) are in expansion, and the Customers' Inventories Index remains in 'too low' territory, contracting at a slightly slower rate. A 'too low' status for the Customers' Inventories Index is usually considered positive for future production.
"Regarding output, the Production Index is in expansion for the fourth month in a row, and the Employment Index, though still in contraction, improved by 0.7-percentage point. However, 45 percent of panelists still indicate that managing head counts is the norm at their companies as opposed to hiring.
"Finally, inputs (defined as supplier deliveries, inventories, prices and imports) all increased since the previous month's reading. The Supplier Deliveries Index indicated slower deliveries, Inventories Index contraction has slowed, and the Prices Index took a huge leap to 70.5 percent from 59 percent in January.
"Looking at the manufacturing economy, 21 percent of the sector's gross domestic product (GDP) contracted in February, compared to 20 percent in January, and the percentage of manufacturing GDP in strong contraction (defined as a composite PMI of 45 percent or lower) decreased to 1 percent, compared to 12 percent in January. The share of sector GDP with a PMI at or below 45 percent is a good metric to gauge overall manufacturing weakness. Of the six largest manufacturing industries, four (Chemical Products; Machinery; Transportation Equipment; and Computer & Electronic Products) expanded in February."
The 12 manufacturing industries reporting growth in February — listed in order — are: Printing & Related Support Activities; Textile Mills; Primary Metals; Nonmetallic Mineral Products; Chemical Products; Machinery; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Transportation Equipment; Plastics & Rubber Products; Miscellaneous Manufacturing; and Computer & Electronic Products. The five industries reporting contraction in February are: Apparel, Leather & Allied Products; Furniture & Related Products; Petroleum & Coal Products; Wood Products; and Food, Beverage & Tobacco Products.
WHAT RESPONDENTS ARE SAYING
- "Today, American produced commodities like steel and aluminum are the highest priced in the world, by far. Hence, the Section 232 tariff policy is having the exact opposite effect of their intention on an American manufacturer like us: It is raising prices while lowering demand and profitability." [Transportation Equipment]
- "Economic activity seems to be also challenging for this year. Some recovery in certain sectors in the economy but still lot of cost pressures and soft demand. Cost discipline is the priority." [Chemical Products]
- "January sales continued to provide positive indications for growth opportunities. Data center, health care, and food and beverages remain positive growth areas. We continue to receive price increase notifications from suppliers based on unsupported tariff claims and are expanding corporate staff to support sales growth." [Chemical Products]
- "South American instability has begun to be a factor for our suppliers and inventory management." [Petroleum & Coal Products]
- "Pricing for outside purchases has stabilized. We are spending significant effort to work with our supply base to mitigate tariff impacts. Backlog is at a healthy level." [Miscellaneous Manufacturing]
- "Overall orders and supply footprint are improving. As we review customer demand, we are also taking several categories of established materials and supplies out to RFP for review and cost improvements — in particular, printed circuit assemblies, plastics, sheet metal assemblies and motorized assemblies. This will help ease the burden of tariff and customer impacts as we broaden our supplier base to a more regional footprint." [Computer & Electronic Products]
- "Continue to be impacted by tariffs. Seeing metals prices rise too. Business is steady, but domestic growth is slower than expected." [Computer & Electronic Products]
- "Business was slow in January. Many orders pulled into end of 2025 to meet revenue goals. Order book is strong going forward." [Electrical Equipment, Appliances & Components]
- "Tariff policy changes affect total acquisition costs and purchasing source decisions. So far this year, tariff instability still exists. Due to the tariffs, most raw materials used in manufacturing, such as steel and wire, need to be sourced domestically, and the cost keeps going up." [Machinery]
- "Business is improving by the week. Backlog is growing, and new opportunities are everywhere. Monthly shipments are still lower than planned, but improving. Over the past five years, we spent thousands trying to attract new employees and had almost zero responses. In the last six months, however, we've been able to hire experienced engineers, computer numerical control (CNC) operators, and young people wanting to become CNC machinists." [Fabricated Metal Products]
