PMI Report: Manufacturing Activity Growth Slows Slightly

The Institute for Supply Management’s survey of manufacturers showed manufacturing continued to expand for a second month in February 2026, albeit at a slower rate than previously. The Institute’s headline index for manufacturing growth fell by 0.2 points to 54.4%, driven by continued contraction in the employment index and sustained but slower growth in new orders and production.

Of the three main indexes used to calculate the headline PMI index, the new orders and production indexes both grew at a slower rate than previously, while the employment index improved such that it continued to shrink but also at a slower rate. The figure for new orders fell by 1.3 points to land at 55.8%, the production index fell 2.4 points to 53.5%, and the employment index rose by 0.7 points to 48.8%.

In statements, Susan Spence, Chair of the ISM’s Manufacturing Business Survey Committee, identified strong demand, stable output and increasing inputs as prices rose a dramatic 11.5 points to 70.5%, indicating rapidly increasing price hikes. In a statement accompanying the report, Spence noted that more manufacturing businesses are growing than are shrinking.

“Looking at the manufacturing economy, 21% of the sector’s gross domestic product (GDP) contracted in February, compared to 20% in January, and the percentage of manufacturing GDP in strong contraction (defined as a composite PMI^® of 45% or lower) decreased to 1%, compared to 12% in January,” Spence noted. “The share of sector GDP with a PMI^® at or below 45% is a good metric to gauge overall manufacturing weakness. Of the six largest manufacturing industries, four (Chemical Products; Machinery; Transportation Equipment; and Computer & Electronic Products) expanded in February.”

Comments from surveyed machinery and fabricated metal products suggested tentative improvement in manufacturing weighed down by tariffs, especially on imported metals.

“Today, American produced commodities like steel and aluminum are the highest priced in the world, by far,” wrote a surveyed executive in the transportation equipment industry. “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.”

In commodities, aluminum prices continued to rise, as did brass, copper, copper products, precious metals, steel, hot rolled steel, stainless steel, and steel products, among others.