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U.S. Manufacturing Expands in February as Factory Input Prices Surge to 3‑1/2‑Year High
WASHINGTON — U.S. manufacturing activity expanded again in February while input prices at factories surged to a near 3‑1/2‑year high, reflecting rising costs from tariffs and other pressures, even before U.S.-led military action in Iran sent oil prices higher.
The Institute for Supply Management reported its manufacturing purchasing managers index at 52.4, indicating continued expansion after January’s rebound, which ended a 10‑month stretch of contraction. Twelve industries, including primary metals, machinery, electrical equipment, appliances, transportation equipment, miscellaneous manufacturing as well as computer and electronic products showed growth. Five sectors, including furniture, food, beverage and tobacco, recorded contractions.
The prices paid index jumped to 70.5, the highest reading since June 2022. Supplier delivery times continued to lengthen, rising to 55.1, while new orders slowed slightly to 55.8. Backlog orders climbed to the highest level since May 2022, and export orders remained steady. The survey's measure of manufacturing employment edged up to 48.8 from 48.1 in January. Manufacturers were not filling open positions to manage headcount, the ISM said.
Tariffs remain a constraint on production. Producers of miscellaneous manufactured goods reported efforts to work with suppliers to mitigate tariff impacts. Machinery manufacturers said tariffs affected acquisition costs and sourcing decisions, requiring most raw materials to be sourced domestically at rising prices.
Economists expect tax legislation, including permanent bonus depreciation, to support manufacturing growth this year. Rising oil prices and global uncertainties could add to inflationary pressures, potentially affecting Federal Reserve interest rate decisions.
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