Two surveys released on Monday provided an interesting juxtaposition regarding the US manufacturing sector's performance for February. The data from the Institute for Supply Management (ISM) indicated a deceleration in expansion, while S&P Global ($SPGI) reported the most significant growth rate since June 2022. The ISM’s purchasing managers' index slightly decreased to 50.3 last month from a previous 50.9 in January.
A figure above 50 suggests that the manufacturing sector is generally in a state of expansion, whereas a reading below that threshold indicates contraction. The anticipations for the survey compiled by Bloomberg were set at a 50.8 reading. "US manufacturing activity expanded marginally for the second consecutive month in February, following 26 months of continuous contraction," remarked Timothy Fiore, chair of the ISM's manufacturing business survey committee.
He noted that while demand has weakened, output has stabilized, and for the first time in several months, the inputs have contributed positively to the PMI growth. The production index fell to 50.7 in February from January's 52.5. New orders experienced an even sharper decline, dropping 6.5 percentage points to 48.6, marking the most significant single-month drop since April 2020, as per the survey findings.
The employment index decreased by 2.7 percentage points sequentially, concluding at 47.6 last month. In contrast, the prices index saw an uptrend, rising to 62.4 from 54.9. BMO Capital Markets Senior Economist Priscilla Thiagamoorthy opined that price pressures are likely "stirring again" within the production pipeline.
"This situation is contrary to the Federal Reserve’s objectives, especially as firms could soon be directly dealing with ramifications from substantial tariffs," she mentioned. Adding to the complexity, last week, President Donald Trump announced that the proposed 25% tariffs on imports from Mexico and Canada would commence on Tuesday, along with an additional 10% tariff on Chinese imports effective on the same date. In a contrasting report, S&P Global ($SPGI) disclosed that its manufacturing PMI surged to 52.7 last month, up from January's 51.2 reading, signifying the best growth rate since June 2022.
Analyst consensus from a Bloomberg poll projected a reading of 51.6. Both new orders and production observed "noticeable upturns" in February, with indications that advanced purchases played a role in driving sector growth in anticipation of potential price hikes and supply disruptions due to forthcoming tariffs.
According to the data provider, this proactive inventory building was influenced by companies and their customers striving to mitigate the effects of expected price increases and supply chain issues caused by tariffs. S&P Global Market Intelligence's Chief Business Economist Chris Williamson elaborated that exports have faced a slump, while supplier delivery delays have been the most significant since October 2022, primarily attributed to trade disruptions linked to tariff anxieties. Price: 535.53, Change: +1.79, Percent Change: +0.34.