US manufacturing showed stability in February, but price pressures surged to nearly a three-year high. The Institute for Supply Management (ISM) survey found that the manufacturing Purchasing Managers’ Index (PMI) dipped 0.6 percentage points to 50.3, marking the first expansion since October 2022.
Manufacturers are worried about tariffs on imports, which could soon undercut production. Many said the tariffs created an uncertain operating environment and were concerned about their exposure to retaliatory measures from countries like Canada, Mexico, and China.
The goods trade deficit surged, and homebuilding declined in January, reinforcing views that the economy lost significant momentum early in the first quarter. Some economists expect a gross domestic product contraction this quarter.
The ISM survey’s new orders sub-index slumped to 48.6, while its measure of prices paid for inputs rose to 62.4, the highest reading since June 2022. This suggests that goods prices could continue to rise after increasing by the most in 11 months in January.
Imports grew further as factories front-loaded materials, boosting inventories. However, factory employment contracted as firms laid off workers. The manufacturing jobs index dropped to 47.6.
Manufacturing accounts for 10.3% of the economy and is closely linked to consumer spending and homebuilding. The uncertainty surrounding tariffs could have a negative impact on the overall economy.
Economists warn that tariffs will raise prices, contributing to inflation concerns. The Federal Reserve’s aggressive monetary policy tightening in 2022 and 2023 may have triggered this downturn.
Source: https://www.reuters.com/markets/us/us-manufacturing-stable-february-storm-brewing-tariffs-2025-03-03