ISM® PMI® Reports Roundup: February Manufacturing
On occasion, discussion involving the ISM® Manufacturing PMI® Report will be dominated by a breaking news event that had little to do with the data, because it happened after most or all of the survey responses had been collected.
February was one of those months — with not one, but two such events. Just when it was assumed that much of the chatter on Monday would be on the Supreme Court striking down President Donald Trump’s International Emergency Economic Powers Act (IEEPA) tariffs 10 days ago, the manufacturing sector awoke on Saturday to news that U.S. and Israeli forces launched strikes against Iran, likely impacting oil supply and price, among other risks.
The events, particularly the latter, overshadowed another positive month of numbers: Buying activity continued in February, as expansion in new orders, backlogs and exports helped the Manufacturing PMI® register 52.4 percent, 0.2 percentage point lower compared to the previous month but reassurance after concerns that January’s expansion could be a one-off.
As we are all following the war in Iran, ISM US Manufacturing Activity beat expectations and expanded again in February.
— Daniel Baldwin (@baldwin_daniel_) March 2, 2026
It came in at 52.4.
Back to back months showing expanding manufacturing for the first time in four years.
“It’s the second month in a row, and even though it’s a slower growth rate, the demand indicators are holding,” Susan Spence, MBA, Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee, told a conference call of reporters on Monday.
She continued, “I’m hopeful the Supreme Court ruling could shake loose some additional customer orders, but we’re going to continue to be cautious on the administration’s continued push to replace the IEEPA tariffs with other mechanisms, which might keep those price uncertainties alive. A lack of backfilling and hiring, coupled with price increases, is still putting the manufacturing economy at risk.”
The direction of the Prices Index was a surprise — “I would love to be able to tell you we saw that coming,” Spence said on ISM’s LinkedIn Live broadcast on Monday — and the recent news will likely add to the uncertainty and indigestion. The index vaulted 11.5 percentage points in February to 70.5 percent, its highest reading since June 2022 (78.5 percent).
That reading came on the heels of Friday’s announcement that the core producer price index (PPI) increased in January by a seasonally adjusted 0.8 percent, more than expected. That reading excludes volatile food and energy prices.
“American produced commodities like steel and aluminum are the highest priced in the world, by far,” wrote a panelist in Transportation Equipment. “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.”
Energy markets were rattled on Monday, with oil prices up 8 percent and diesel increasing by 17 percent as companies evaluated risk amid disruptions in the Strait of Hormuz, a supply chain node for 20 percent of the world’s petroleum liquids consumption.
“Supply managers have yet another challenge on their hands,” Spence said, “but frankly, this points to the need to really risk-rate all your categories and understand where you’re getting supplies. Whether and whether it’s a pandemic or some other weather event or political event, companies have to play the worst-case scenario when planning to weather the storm.”
ISM manufacturing index for prices paid rose to 70.5 from 59.0 the previous month. That was before the middle east conflict drove up energy prices. Not great news on the inflation front.
— Kathy Jones (@KathyJones) March 2, 2026
That mindset also applies on tariffs, as the Trump administration continues to roll out new levies. The New Export Orders Index remained in expansion in February, up 0.1 percentage point to 50.3 percent while the Imports Index registered 54.9 percent, a 4.9-point increase and its highest reading since February 2022 (55.4 percent).
“I wouldn’t be surprised if price pressure continues,” Spence said. “What I’m watching for is what will happen with new orders: Will international customers help keep it in expansion? Right now, it’s one of those answers that raises more questions.”
In other index readings and developments overshadowed by current events:
- The Backlog of Orders Index was the most positive demand development, up 5.0 percentage points to 56.6 percent, its highest reading since May 2022 (58.7 percent). The New Orders Index reading of 55.8 percent is 1.3 percentage points lower compared to January.
- The Employment Index registered 48.8 percent, up 0.7 percentage point. That modest gain is not enough to alleviate concerns in the sector, as Spence said companies remain hesitant to fill open positions.
- Of the six largest manufacturing industries, four — Chemical Products, Machinery, Transportation Equipment and Computer & Electronic Products — expanded in February. One that did not, Petroleum & Coal Products, figures to be the most-watched industry this month.
“Energy is the obvious one (to watch),” Spence said. “In the transportation equipment area, panelists talk about supply constraints because of the conflict and disruptions at the Suez Canal. It really depends on the sector and where raw materials are imported from. In general, people will be on high alert.”
She added, “It really depends on how long this lasts. You have this latest conflict piling on top of what’s going to happen next with tariffs. There always seem to be complicating factors.”
The ISM® PMI® Reports roundup:
Barron’s: U.S. Manufacturing Activity Expands for Second Straight Month. “The U.S. manufacturing economy gave investors some good news on Monday: A second consecutive month of growth. … The Employment Index was 48.8 percent, which indicates manufacturers are shedding jobs. That reflects some ongoing caution in the sector.”
Bloomberg: U.S. Manufacturing Grew, Input Costs Soared Before Iran Attack. “The (Iran) conflict also risks tempering a nascent recovery in manufacturing. (The Manufacturing PMI®) was little changed at 52.4 percent, indicating a second month of growth at one of the highest readings in recent years. Orders and production growth remained solid.”
CNBC: ISM Manufacturing PMI Comes in at 52.4% in February. “If we look at (the Prices Index), we’d rather these go down, but zoom, zoom, zoom: 70.5 percent, well ahead of the 60-ish we were looking for and 59 percent (in January),” analyst Rick Santelli said. “That would be the warmest since June 2022.”
Logistics Management: ISM Report Highlights Manufacturing Growth for Second Straight Month in February. “As for the Supreme Court’s recent decision ruling against the legality of President Trump’s implementation of IEEPA tariffs, which was subsequently replaced by 10% global Section 122 tariffs for a 150-day period, Spence noted that where things go from here require a watchful eye.”
Mace News: Manufacturing PMI® Stays in Expansionary State in February but Many Firms Complain U.S. Tariffs Boosting Procurement Costs. “Asked whether the prices index is likely to continue rising in March in the aftermath of weekend attacks by Israeli and U.S. forces against Iran that killed its leader, Spence replied, ‘I wouldn’t be surprised.’ … Spence said her focus is on how higher costs and other factors will affect new orders in coming months, key to a sustained recovery in the manufacturing sector.”
MarketWatch: U.S. Manufacturers Grow for Second Straight Month, but ‘Tariff Instability Still Exists’. “The Supreme Court’s decision to strike down President Donald Trump’s original tariffs increased — rather than reducing — uncertainty among manufacturers. The replacement tariffs put in place by Trump are likely to weigh on businesses for at least the next several months.”
Eight mentions of tariffs in the comments section in the February ISM Manufacturing PMI pic.twitter.com/tL5tvWjTvv
— Kevin Gordon (@KevRGordon) March 2, 2026
Reuters: U.S. Manufacturing Grows Steadily in February, Input Prices Surge. “Amid the tariff gloom, the technology parts of manufacturing have received a boost from the accelerated adoption of artificial intelligence and construction of data centers. The sector has yet to experience the rebirth that Trump envisioned with his import duties. Manufacturing employment has declined by 83,000 jobs since January 2025.”
The Wall Street Journal: U.S. Factory Activity Continued to Expand in February. “The (New Orders Index) expanded for the second straight month after four straight readings in contraction, but was down slightly from January’s figure. The Production Index also expanded at a slower pace than January. The Backlog of Orders Index registered its highest reading since May 2022.”
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(Photo credit: Getty Images/Daniel Azocar)