Economic Data and Growth

The S&P Global Flash U.S. Manufacturing PMI fell from 52.4 to 51.2 in February, a seven-month low, although it remained positive. This continued the trend of seven consecutive months of growth, but marked the weakest advancement seen during that period. Factory production and new order growth both decreased in February, with production exhibiting its weakest growth since July. Meanwhile, export orders declined for the sixth consecutive month, which was due partially to adverse weather.

Inventories decreased in February as the stock of finished goods fell for the first time since July and at the sharpest rate in 13 months. At the same time, supplier delivery times lengthened to the greatest extent since October 2022, with respondents linking the increase to supplier delays, shortages and poor weather. Manufacturers’ input cost inflation ticked higher and continued to remain high by historical norms. Meanwhile, selling price inflation moderated to a 14-month low, resulting from increasing discounts to boost sales. Overall, price increases slowed for manufacturers but accelerated for the service industry.

Overall business activity declined to a 10-month low, edging down from 53.0 in January to 52.3 in February. In addition to manufacturing growth slowing, the growth rate in the services sector also moderated, falling to a 10-month low. Overall, new orders growth cooled as companies cited high prices hurting sales. Employment rose only slightly due to sluggish sales and concerns over rising costs.

On the other hand, optimism about future business conditions jumped in February to a 13-month high. The optimism reflected expectations for improving economic conditions and a boost after frigid weather lets up. In addition, companies expressed hope for greater policy support, including lower interest rates and government fiscal stimulus.