–ISM’s Spence: Wouldn’t Be Surprised If Price Pressure Continued in Light of Heightened Tensions in Middle East
By Max Sato
(MaceNews) – U.S. manufacturing activity stayed in expansionary territory in February after springing back to life from a year-long slumber the previous month but firms are blaming the protectionist trade policy under President Donald Trump for surging costs as stiff tariffs on imports are forcing them to procure from more expensive domestic suppliers.
The purchasing managers index compiled by the Institute for Supply Management edged down 0.2 percentage point to 52.4 after jumping 4.7 points to a 41-month high of 52.6 in January on vague optimism about demand recovery in the new year. The February slip was largely due to a pullback in new orders and production, both of which had hit a nearly four-year high in January. The index has been in the positive area only for the third time in 40 months.
Looking at overall sentiment, the February report showed that for every positive comment, there were 2.5 negative comments, little changed from the 1 to 2.3 ratio found in the previous month, according to ISM Manufacturing Business Survey Committee Chair Susan Spence.
Spence told reporters that “we are going to continue to be cautious” about the negative impact of the new tariffs that are replacing those under the International Emergency Economic Powers Act, the use of which by President Trump has been ruled as unlawful by the Supreme Court. The court ruling came just after the ISM had finished gathering information for its February report, she said.
The prices index surged to the highest level in more than three years in February as the Trump tariffs are having a widespread impact on procurement costs. The ISM’s analysis is that the increase reflects a combination of factors, including tariff-related uncertainty, advance supplier price notifications and precautionary pricing behavior.
“We continue to receive price increase notifications from suppliers based on unsupported tariff claims,” a chemical producer told the ISM. A machinery maker also noted, “Due to the tariffs, most raw materials used in manufacturing, such as steel and wire, need to be sourced domestically, and the cost keeps going up.”
A company in the transport equipment industry summed it up by pointing that commodities produced in the United States including steel and aluminum are the highest priced in the world. “Hence, the Section 232 tariff policy is having the exact opposite effect of their intention on an American manufacturer like us: It is raising prices while lowering demand and profitability,” it said.
Asked whether the prices index is likely to continue rising in March in the aftermath of weekend attacks by Israeli and U.S. forces against Iran that Killed its leader, Spence replied, “I wouldn’t be surprised.” She declined to provide energy market forecasts but added, “The question would be is it enough to keep it going even higher and how long will the conflict last.”
Whether a spike in costs or a supply chain disruption is caused by a pandemic, war, bad weather or political factors, Spence said the ISM leadership will continue encouraging member firms “to prepare for the worst- case scenario in planning.”
Spence said her focus is on how higher costs and other factors will affect new orders in coming months, key to a sustained recovery in the manufacturing sector. The employment index has been below the neutral level of 50 since October 2023 because firms continue to focus on accelerating staff reductions due to uncertain near- to mid-term demand, she said.
The five sub-indexes that make up for the PMI (January figures in parentheses):
New orders 55.8 (57.1) -1.3; following a 9.7-poing jump in January to the highest since 59.7 in February 2022
Production 53.5 (55.9) -2.4; following a 5.2% rise in January to the highest since 58.1 in February 2022
Employment 48.8 (48.1) +0.7; after the index gained 3.3 points to hit the highest level since 49.7 in January 2025
Supplier deliveries 55.1 (54.4) +0.7; staying at the highest since 55.2 in April 2025 (above 50 means slower deliveries)
Inventories 48.8 (47.6) +1.2; the highest since 48.9 in August 2025
Among other sub-indexes:
Customers’ inventories 38.8 (38.7) +0.1; after falling 4.6 points in January to the lowest since 35.2 in June 2022
Prices 70.5 (59.0) +11.5; the highest since 78.5 in June 2022
Back in June 2022, the prices index eased further to 78.5 from 82.2 in May, 84.6 in April and a peak of 87.1 in March 2022, when it jumped 11.5 points, following Russia’s invasion of Ukraine on Feb. 24 that sparked concerns about energy and commodities supply from the region.
The ISM report for June 2022 showed that U.S. manufacturing activity growth slowed that month to the lowest rate in two years with softer new orders and record high lead times needed to deliver goods as companies continued to face labor shortages, supply delays, and high prices.