Manufacturing PMI® Dips to 50.3% in February: What It Means for the Economy

U.S. Manufacturing Growth Slows Amid Tariff Uncertainty

The U.S. manufacturing sector expanded for the second consecutive month in February 2025, according to the latest Manufacturing ISM® Report On Business®. However, the Manufacturing PMI® fell to 50.3%, down from 50.9%in January, signaling weaker growth. While production increased slightly, new orders and employment declined, reflecting ongoing uncertainty driven by pending tariffs and inflationary pressures.

What Is the Manufacturing PMI®?

The Purchasing Managers’ Index (PMI®) is a key economic indicator that tracks manufacturing activity based on surveys from supply chain executives. A PMI® above 50% indicates expansion, while a reading below 50% signals contraction. In February, the PMI® remained above 50%, suggesting that manufacturing is still growing—albeit at a slower pace.

Why Does This Matter?

The February PMI® report highlights several economic trends:

• New Orders and Backlogs Declined – Demand for manufactured goods weakened, likely due to uncertainty surrounding tariffs on imports from Mexico and Canada.
• Production and Supplier Deliveries Slowed – Factories cautiously managed output while suppliers faced delivery delays.
• Employment Declined – Companies continued reducing workforce levels, primarily through attrition.
• Prices Surged – Raw material costs increased due to preemptive pricing reactions to upcoming tariffs.

These factors indicate economic uncertainty and could influence future business investments, job growth, and consumer prices.

How Does This Affect You?

• For Consumers: Higher production costs could lead to price increases on everyday goods, especially those impacted by tariffs on imported materials.
• For Businesses: Manufacturers are facing rising costs and supply chain delays, which could slow down production and limit expansion.
• For Investors: The slower PMI® growth signals economic caution, potentially impacting stock market trendsand interest rate decisions by the Federal Reserve.

With tariffs set to take effect in mid-March, the next PMI® report will be critical in assessing their impact on the manufacturing sector and the broader economy.

Full report: ISM® Report on Business® – February 2025