Manufacturing activity in the US slowed in February as demand weakened, output growth eased and prices surged as producers braced for a raft of tariffs threatened by the new US administration.
The Institute for Supply Management's (ISM) manufacturing purchasing managers index registered 50.3 in February, down from 50.9 in January, marking a second month of growth after 26 consecutive months of contraction. The breakeven point between growth and contraction is 50. Economists surveyed by Trading Economics had forecast 50.5 for the headline reading.
"US manufacturing activity expanded marginally for the second month in a row in February," ISM said. "Demand weakened, while output stabilized. Inputs — defined as supplier deliveries, inventories, prices and imports — revealed the first signs of supplier difficulties due to some pull-forward deliveries and discussions about who will pay for tariffs."
The new orders index dropped back into contraction territory in February after expanding for three months, registering 48.6 percent, down from 55.1 in January.
The production index was at 50.7, down from 52.5 in the prior month but still showing growth after eight months of contraction.
The prices index surged to 62.4, up from 54.9 in January.
The backlog of orders index registered 46.8, up from 44.9 in January. The employment index came in at 47.6, down from 50.3 the prior month.
The supplier deliveries index was at 54.5, up from 50.9 and indicating further slowing in deliveries as the economy improves.
The new export orders index reading of 51.4 was down from 52.4 in January, showing slowing growth. The imports index rose to 52.6, up from 51.1 in January.
Comments highlight tariff information vacuum
Comments from survey participants showed a great deal of uncertainty about how the White House's tariff plans would effect operations and the economy.
"The tariff environment regarding products from Mexico and Canada has created uncertainty and volatility among our customers and increased our exposure to retaliatory measures from these countries," a chemical products producer said in the survey.
A transportation equipment manufacturer said that customers had paused new orders because of the many unknowns around the US' tariff plans.
"There is no clear direction from the administration on how they will be implemented, so it's harder to project how they will affect business," the company said.
The threat of the tariffs had had minimal impact on overall manufacturing and raw material supply as of the time of the survey, according to an electronics manufacturer. But limits on US government spending from organizations like the Food and Drug Administration, Environmental Protection Agency and National Institutes of Health were delaying some orders, the company said.
But a machinery manufacturer said the pending tariffs were leading to higher costs for its products.
"Sweeping price increases are incoming from suppliers. Most are noting increases in labor costs. Vendors are indicating open capacity. Inflationary pressures are a concern," the company said in the survey.
By Bob Willis
