ISM PMI starts '26 off strong with two months of growth in manufacturing

ISM said February marked just the third month of manufacturing expansion in the past 40 months. The overall economy expanded for the 16th consecutive month.

“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,” noted Susan Spence, chair of the ISM Manufacturing Business Survey Committee.

The report shows growing backlogs, with the order backlog subindex increasing by five percentage points from January to 56.6 in February. Inventories were still contracting in February, albeit at a slower pace than in the month prior.

Primary metals, machinery, fabricated metal products, appliances and components, and transportation equipment reported growth in February.

Noteworthy in February’s report is the Price Index, which jumped from 59% in January to 70.5%. Every commodity tracked by ISM, including hot-rolled and stainless steels, rose in price this month, except freight.

“Today, American-produced commodities like steel and aluminum are the highest priced in the world, by far,” commented one respondent from the transportation equipment sector. “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.”

“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,” said a machinery sector respondent.

Still, “Business is improving by the week,” said a fabricated metal products respondent. “Backlog is growing, and new opportunities are everywhere.”