U.S. manufacturing expanded in February for a second straight month, but growth cooled slightly as hiring remained weak and supply managers reported a sharp jump in input costs, according to the Institute for Supply Management.
ISM’s Manufacturing Purchasing Managers Index registered 52.4 in February, down from 52.6 in January. Readings above 50 indicate expansion.
The report’s most striking shift was on prices. ISM’s Prices Index surged to 70.5, up 11.5 points from January and the highest reading since June 2022, pointing to faster increases in raw-materials costs.
“The prices index took a huge leap to 70.5% from 59% in January,” said Susan Spence, chair of ISM’s Manufacturing business survey committee. She said input measures broadly strengthened even as overall growth slowed.
Measures of demand stayed in expansion. ISM’s new orders Index registered 55.8, down from 57.1 in January but still signaling growth. The backlog of orders Index rose to 56.6, up 5 points from January and the highest reading since May 2022, suggesting factories are seeing a fuller pipeline of work.
Customers also continued to carry lean inventories. ISM’s Customers’ Inventories Index was 38.8, remaining in “too low” territory, a condition that can support future production if buyers restock.
Manufacturing output expanded for a fourth straight month, but the pace softened. ISM’s Production Index registered 53.5, down 2.4 points from January’s 55.9.
Suppliers also took longer to deliver. ISM’s Supplier Deliveries Index increased to 55.1 from 54.4 in January. In ISM’s framework, readings above 50 indicate slower deliveries.
Employment remained a weak spot. ISM’s Employment Index registered 48.8, up from 48.1 in January but still below 50, indicating contraction.
Spence said about 45% of respondents reported that managing head count, rather than hiring, remains the norm.
Several manufacturers cited tariffs and metals prices as key drivers of higher costs.
“Today, American produced commodities like steel and aluminum are the highest priced in the world, by far,” one respondent in Transportation Equipment said. “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.”
A respondent in Machinery said, “tariff instability still exists” and is influencing sourcing decisions. The respondent added that raw materials such as steel and wire increasingly need to be sourced domestically and “the cost keeps going up.”
International trade measures also remained in growth territory. ISM’s new export orders Index registered 50.3, slightly higher than in January. The Imports Index rose to 54.9, up 4.9 points from January and the highest reading since February 2022, ISM said.
ISM said 12 of 18 manufacturing industries reported growth in February, including chemical products, machinery, transportation equipment, and computer and electronic products. Five industries reported contractions, including food, beverage and tobacco products and wood products.
ISM’s report is based on a monthly survey of manufacturing supply executives. The next report, covering March data, is scheduled for release April 1.
