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Report On Business® Roundup: February Manufacturing PMI®

March 03, 2025
By Dan Zeiger

A month ago, the Manufacturing ISM® Report On Business® data was released amid a flurry of anxiety regarding announced tariffs — especially those on products from Canada and Mexico, which were paused later that day.

On Monday, the Manufacturing PMI® numbers for February were unveiled, and the tariffs unease had progressed to obsession. The composite index reading of 50.3 percent could have been heralded as a major development, considering it meant consecutive months of expansion for the sector for the first time in more than two years.

However, that was overshadowed by a big spike in the Prices Index — up 7.5 percentage points to 62.4 percent; more on that later — and published survey respondents’ comments with a nearly unanimous subject: the uncertainty and impediments due to the continuing threat of duties from the Trump administration.

The tariffs on Canadian and Mexican products that were paused in January are scheduled to take effect on Tuesday. Duties of 25 percent on all steel and aluminum imports were announced in February; Canada, Brazil and Mexico were the largest exporters of steel to the U.S. last year.

“Suppliers are not taking as many new orders because they’re not going to deliver until there’s an agreement on (which party) is going to pay the tariffs that have already hit,” Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee, told a conference call of reporters on Monday.

“They’ve been through this before (in 2018). This time, nobody is going to wait to see how painful the pain really is.” Such sentiment, Fiore said, likely impacted the New Orders Index, which returned to contraction territory at 48.6 percent, down 6.5 percentage points in February.

As buyers and suppliers wrangled over tariffs, the Supplier Deliveries Index elevated to 54.5 percent. The Supplier Deliveries Index is inversed, meaning a higher reading reflects slower lead times — and that figure kept the PMI® in expansion. Among the five subindexes that directly factor into the PMI®, New Orders, Employment (47.6 percent, down 2.7 percentage points) and Inventories (49.9 percent, up 4 points) were in contraction.

Had the Supplier Deliveries Index figure been more in line with recent trends, Fiore said, the PMI® would have been around 48.5 percent.

Tariffs accounted for two-thirds of Manufacturing Business Survey panelists’ comments in February, the largest share for any issue since ISM began tracking such data. Wrote a survey respondent in Nonmetallic Mineral Products, “Management now has us running scenarios to project tariff impacts to our business. They want numbers in 24 hours on variables that equate to a wild guess. Interesting times we live in.”

Which leads to the Prices Index, “the story of the month,” Fiore said. The reading is the highest since June 2022 (78.5 percent) and the largest single-month increase since a gain of 7.7 percentage points in January 2024.

Fiore noted that the ISM Supply Chain Planning Forecast release in December indicated that manufacturing companies are less confident they can pass price increases to customers. He added that the Prices Index trajectory should be echoed by the federal consumer price index (CPI) and producer price index (PPI), which are closely watched by the U.S. Federal Reserve (Fed).

“I would expect the CPI and the PPI to go up, and you know what that could mean,” Fiore said, referring to the possibility that the Fed would then raise interest rates.

The New Orders and Supplier Deliveries index numbers might be blips and could recover in March, Fiore said. The Prices Index? He’s not so sure.

“There’s no other reason for that number to have gone up, besides the deployment and announcement of tariffs and markets immediately responding to go up with prices,” he said. “That’s what happened the last time there were tariffs on steel.

Fiore added, “So, that’s not going away unless somebody does something about it.”

The Report On Business® roundup:

Barron’s: U.S. Manufacturing Activity Grows Again in February. “New Orders Are a Concern. “Looking ahead, investors will be waiting to see how President Donald Trump’s tariffs will impact the manufacturing sector. … A lot of cars and car parts are manufactured throughout North America. Tariffs raise costs for auto makers that they might not be able to offset with higher prices.”

Bloomberg: U.S. Manufacturing Activity Nears Stagnation While Prices Jump. “Rising input costs represent a challenge for manufacturers against a backdrop of shrinking orders that suggests demand is at risk of retrenching as businesses weigh the implications of tariffs from the Trump administration. Producers may be hard-pressed to pass on higher costs should sales continue to weaken.”

CNBC: Construction Spending and ISM Both Miss in February. “Now, let’s get to the money number,” analyst Rick Santelli said. “ISM’s Manufacturing PMI®, expecting 50.7 percent; it comes in manufacturing light: 50.3 percent. (But) there’s a positive here: January and February back-to-back over 50 percent, the first time that’s happened since September and October of 2022. Where it starts to get a bit dicey is (the Prices Index) at 62.4 percent, well above expectations” with weakening new orders and employment.

MarketWatch: Trump’s Tariff Talk is Raising Inflation and Could Weaken the Economy, ISM Finds: ‘Customers Are Pausing on New Orders’. “Manufacturers and other U.S. companies are waiting to see how Trump’s tariff proposals pan out — and that could be holding the economy back. There’s already some evidence the economy has slowed in early 2025 as businesses and households weigh how to proceed.”

Reuters: U.S. Manufacturing Stable in February Heading Into Tariffs Storm. “U.S. stocks were trading lower. “Production at factories nearly braked after rebounding in the prior month. The dip in the PMI mirrored declines in other sentiment measures as the Trump administration pushes ahead with its plan to ratchet up tariffs on imported goods. … The dollar slipped against a basket of currencies. U.S. Treasury yields were mostly lower.”

The Wall Street Journal: U.S. Factory Activity Eased as Tariffs Threats Spark Accelerating Costs. “(The PMI® reading) was slightly weaker than the 50.6 percent from a consensus of economists polled by The Wall Street Journal. Demand eased in the month, while production stabilized, and destaffing continued as companies experience the first operational shock of the new Trump administration’s tariff policy, said (Fiore).”

ISM’s Services PMI® will be unveiled on Wednesday, and the Hospital PMI® on Friday. For the most up-to-date content on the reports under the ISM® Report On Business® umbrella, use #ISMPMI on X, formerly known as Twitter.

(Photo credit: Getty Images/Ric Aguiar)

About the Author

Dan Zeiger

About the Author

Dan Zeiger is Senior Copy Editor/Writer for Inside Supply Management® magazine, covering topics, trends and issues relating to supply chain management.