U.S. Manufacturing Activity Expands for Second Straight Month

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Written by Danny Levin, Deputy Editor for IIR News (Sugar Land, Texas)

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Summary

The Institute of Supply Management's (ISM) February Purchasing Managers Index indicates U.S. manufacturing activity expanded for the second straight month.

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The ISM's Latest Purchasing Manager's Index

U.S. manufacturing activity expanded for the second consecutive month in February, according to the Institute of Supply Management's (ISM) Purchasing Managers Index, but only the third time in 40 months. Main demand indicators new orders and production continue to show growth--albeit at a slower pace month-over-month.

The PMI, which tracks 18 manufacturing sectors in the U.S., registered 52.4% in February, nearly flat compared with 52.6% in January. Any reading over 50% indicates expansion in the manufacturing economy. The latter month marked the highest figure since September 2022 and the first expansion in manufacturing activity in 12 months.

Any reading under 50% indicates contraction in the manufacturing economy.

"In February, U.S. manufacturing activity remained in expansion territory, although growing at a slower pace than the month before. Of the five subindexes that make up the PMI, two (New Orders and Production) indicated slower growth compared to the previous month, and the Employment and Inventories indexes remained in contraction." said Susan Spence, chair of the ISM Manufacturing Business Survey Committee, in the latest summary of findings for the PMI survey.

Still, three demand subindexes--New Orders, Backlog of Orders and New Export Orders-- continue in expansion territory. In addition, "the Customers' Inventories Index remains in 'too low' territory, contracting at a slightly slower rate. A 'too low' status for the Customers' Inventories Index is usually considered positive for future production."

Spence noted for every negative survey comment about new orders, two comments indicated optimism about near-term demand. Of the six largest manufacturing industries, four (Computer & Electronic Products; Chemical Products; Machinery; and Transportation Equipment) reported increased new orders.

The other two largest are Petroleum & Coal Products, and Food, Beverage & Tobacco Products.

Headwinds Impacting U.S. Manufacturing Operations

All of the six largest manufacturing industries reported price increases in February, with the Prices Index jumping to 70.5% from 59% in January.

That index indicated raw materials prices increased for the 17th straight month. The index "continues to be driven by increases in steel and aluminum prices that impact the entire value chain, as well as tariffs applied to many imported goods." About 45% of respondents reported higher prices in February, up from 29% in January, but lower than the 49.2% in April 2025.

But the survey was conducted before the Supreme Court struck down President Donald Trump's sweeping International Emergency Economic Powers Act (IEEPA) tariffs, which is expected to have a positive impact on U.S. manufacturing activity. However, tariffs under Section 232 remain in force to impose tariffs on a wide range of products, including imported steel and aluminum. For more information, see February 27, 2026, article - Initial Reaction to New Tariffs Muted as Lawyers Assess Legality.

One respondent from Transportation Equipment said, "Today, American produced commodities like steel and aluminum are the highest priced in the world, by far. 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."

A respondent from Machinery said, "Tariff policy changes affect total acquisition costs and purchasing source decisions. So far this year, tariff instability still exists. 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."

Meanwhile, others expressed some positivity moving forward. One from Computer & Electronic Products said, "overall orders and supply footprint are improving," while one from Fabricated Metal Products said, "business is improving by the week. Backlog is growing, and new opportunities are everywhere. Monthly shipments are still lower than planned, but improving."

It remains to be seen what kind of effect the elimination of the IEEPA tariffs, and potential tariff rebates, will have on U.S. manufacturing activity moving forward.

U.S. Manufacturing Projects Under Construction

Data from Industrial Info's Global Market Intelligence (GMI) Project Database shows more than $500 billion worth of Industrial Manufacturing Industry projects are under construction across the U.S.

About 40% of the overall spend is attributed to data centers. This includes the start of construction on Google's planned five-building, 1.4 million-square-foot data center campus in Haskell, Texas. The first building is expected to wrap up in mid-2027. Subscribers to the database can view a full list of related project reports.

While data center projects are most prevalent, semiconductor-related activity accounts for several of the highest-valued U.S. manufacturing projects under construction. Among them are Micron's $25 billion IDI1 expansion at its Boise Fab 4 Memory and Semiconductors Campus in Idaho. Production is set to begin in the second half of 2027.

Subscribers can read a detailed project report, and click here for a full list of U.S. Industrial Manufacturing Industry projects under construction.

Key Takeaways

• The ISM's Manufacturing PMI notes economic activity in U.S. manufacturing expanded for the second straight month.
• New orders and production continue to show growth, albeit at a slower pace month-over-month.
• Manufacturers are still weary of tariffs impacts and other economic uncertainty.
• U.S. manufacturing construction remains robust, according to IIR data, especially in the data center sector.

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About IIR News Intelligence
IIR News Intelligence is a trusted source of news for the industrial process and energy markets, powered by Industrial Info Resources' Global Market Intelligence (GMI).

About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).