News & Insights

In February, the U.S. manufacturing sector expanded for the second consecutive month but at a slightly slower pace than the prior month, with the ISM Manufacturing® PMI decreasing to 52.4% from 52.6% in January. Demand indicators remained in expansion territory, with the New Orders, New Export Orders and Backlog of Orders Indexes at 55.8%, 50.3% and 56.6%, respectively. Meanwhile, the Customers’ Inventories Index continued to contract into “too low” territory, ticking up 0.1 percentage point to 38.8, which is also a positive sign for future production. Meanwhile, the Production Index expanded at a slower pace in February, decreasing from 55.9% to 53.5%.

The New Orders Index expanded for a second consecutive month in February but at a slower pace, falling 1.3 percentage points from January. Of the six largest manufacturing sectors, four—machinery, transportation equipment, chemical products and computer and electronic products—reported an increase in new orders. In a turnaround from recent months, respondents noted optimism about near-term demand.

The New Export Orders Index expanded for a second consecutive month in February and at a slightly faster pace, 0.1 percentage point higher than January. Nonetheless, respondents remain concerned about trade frictions, with a negative comment for every positive comment. Meanwhile, the Imports Index expanded for the first time since March, up 4.9 percentage points from January to 54.9%, the highest increase since February 2022.

The Employment Index contracted for the 13th consecutive month but at a slower pace than the prior month, up 0.7 percentage points from January to 48.8%. Of the six largest manufacturing sectors, two—transportation equipment and machinery—reported increased employment. Companies focused on holding off on filling open positions to restrict headcounts due to uncertainty around near- to mid-term demand. For every comment on hiring, 1.4 respondents noted reduced headcounts.

The Prices Index surged 11.5 percentage points from January to 70.5%, indicating raw materials prices grew for the 17th straight month in February and at a much faster pace than the prior month. Of the six largest manufacturing sectors, all reported increased prices. The increase continues to be driven by higher steel and aluminum prices impacting the entire supply chain, as well as the tariffs applied to most imported goods. Roughly 45.4% of companies reported paying higher prices, up from 29.0% in January and from 21.0% in January 2025.