The U.S. manufacturing sector grew marginally in February, continuing its slow recovery after more than two years of contraction, according to the latest Manufacturing ISM Report On Business. The Purchasing Managers’ Index (PMI®) registered at 50.3%, a slight decline from January’s 50.9%, signaling continued but fragile expansion.

New orders, a key measure of demand, fell back into contraction, dropping 6.5 percentage points to 48.6%, while production remained in growth territory at 50.7%. Employment declined, with the index falling to 47.6% as manufacturers reported workforce reductions due to economic uncertainty. Meanwhile, supplier deliveries slowed, and raw material prices surged, largely driven by anticipated tariffs on imports.

“U.S. manufacturing activity expanded marginally for the second month in a row, but demand weakened,” said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee. “Companies are exercising caution amid economic headwinds, particularly in response to the new administration’s tariff policy, which has already begun to impact commodity prices and supply chain logistics.”

Manufacturers expressed concern about the uncertainty surrounding tariffs, which are set to take effect in mid-March. The report noted a 20% spike in spot commodity prices, contributing to higher input costs for producers. Respondents from multiple industries cited disruptions in new order placements as businesses assess the financial implications of these trade measures.

The report showed mixed performance across industries. Of the six largest manufacturing sectors, four—including Petroleum & Coal Products, Food & Beverage, Chemicals, and Transportation Equipment—expanded in February. However, sectors such as Furniture, Textile Mills, and Computer & Electronic Products continued to contract.

Exports and imports both increased, though at a slower pace, with the New Export Orders Index registering at 51.4%, down from January’s 52.4%. Imports grew at 52.6%, reflecting firms’ efforts to secure materials ahead of tariff enforcement.

Despite February’s growth, the outlook remains uncertain. The ISM report indicates that while manufacturing is stabilizing, ongoing concerns about inflation, trade policy, and labor market conditions could weigh on the sector’s recovery in the coming months.

The next Manufacturing ISM Report On Business, covering March data, is scheduled for release on April 1, 2025.