Input Stories

In February, the U.S. manufacturing sector expanded for the second consecutive month but at a slower pace, with the ISM Manufacturing® PMI falling to 50.3% from 50.9% the prior month. Customer demand weakened, output stabilized and inputs revealed signs of suppliers’ difficulty meeting accelerated delivery requests to head off increased tariff rates. The New Orders and Employment Indexes dropped back into contraction territory, declining to 48.6% and 47.6%, respectively. Production remained in expansion territory but weakened to 50.7%, 1.8 percentage points lower than January. Meanwhile, inventories (49.9%) and backlog of orders (46.8%) contracted at a slower pace in February.

The New Orders Index contracted after expanding for three consecutive months, a 6.5 percentage point drop from January. The index hasn’t shown consistent growth since a 24-month streak of expansion ended in May 2022, and respondents noted a weakening in demand, with four of the six major sectors—petroleum and coal products; machinery; chemical products; and food, beverage and tobacco products—reporting an increase in new orders.

The Production Index expanded for the second consecutive month. Prior to the past two months, the last time the index registered above 50% occurred in April 2024. Of the six largest manufacturing sectors, three—food, beverage and tobacco products; transportation equipment; and chemical products—reported increased production.

The Employment Index decreased 2.7 percentage points in February, returning to contraction after expanding for a single month. Of the six largest manufacturing sectors, only one—transportation equipment—reported increased employment. Companies continued to reduce headcounts through layoffs, attrition and hiring freezes.

The Prices Index rose 7.5 percentage points to 62.4%, indicating raw materials prices increased for the fifth straight month in February, driven by the dramatic rise in commodity prices as a result of new and potential tariffs. Steel, aluminum, copper, food elements, plastics and natural gas registered increases. More than 31% of companies reported paying higher prices, up from 21% in January.