US manufacturing slows as tariff fears hammer new orders

(Sharecast News) - Business growth in the US manufacturing sector almost slowed to a standstill in February, according to a survey out on Monday from the Institute for Supply Management (ISM), as tariff uncertainty resulted in the biggest one-month decline for new orders in four and a half years. The ISM's US manufacturing purchasing managers' index fell to 50.3 last month, 0.6 points lower than January and just 0.3 point above the neutral 50-point level which separates growth from contraction.

While this was the second month of growth after 26 straight months of contraction, February's reading still came in below the consensus forecast of 50.6.

The new orders index declined to just 48.6, down from 55.1 in January, marking the steepest one-month fall since April 2020 after three months of expansion.

The production index dropped to 50.7 from 52.5, while the prices paid index surged to 62.4 from 54.9, showing that raw materials prices increased for the fifth straight month.

Meanwhile, the backlog of orders index rose to 46.8 from 44.9, while the employment index fell to 47.6 from 50.3.

"Demand eased, production stabilised, and destaffing continued as panelists' companies experience the first operational shock of the new administration's tariff policy," said Timothy Fiore, chair of the ISM.

"Prices growth accelerated due to tariffs, causing new order placement backlogs, supplier delivery stoppages and manufacturing inventory impacts. Although tariffs do not go into force until mid-March, spot commodity prices have already risen about 20%."