In February 2025, the US manufacturing sector showed signs of strain as the Institute for Supply Management’s (ISM) manufacturing index edged down to 50.3, a 0.6-point decrease from January’s reading of 50.9. This figure hovers just above the threshold that separates expansion from contraction, indicating marginal growth in the sector.
A deeper look into the components of the index reveals contractions in both new orders and employment. The New Orders Index dropped to 48.6, slipping into contraction territory after three months of expansion, while the Employment Index fell to 47.6, down 2.7 points from January.
Compounding these challenges, manufacturers are grappling with escalating input costs. The ISM’s Prices Index surged by 7.5 points to 62.4, marking the highest level since June 2022. This increase is largely attributed to rising prices for raw materials such as steel and aluminium, driven by the anticipation of new tariffs.
President Donald Trump has announced a 25% tariff on steel and aluminium imports, set to take effect on 12 March 2025. These measures aim to bolster domestic production but have raised concerns about potential inflationary pressures and supply chain disruptions.
Manufacturers are expressing apprehension over these developments. Some companies have reported pausing new orders due to the uncertainty surrounding tariffs, which could dampen future demand and economic growth.
