U.S. manufacturing activity expands, but input prices surge

Investing.com - U.S. factory activity expanded in February, but the Producer Price Index soared significantly, with companies emphasizing the impact of President Donald Trump’s aggressive tariff policies.

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The Institute for Supply Management’s Manufacturing PMI last month was 52.4, above the 50-point threshold indicating expansion and also higher than the market consensus of 51.7. In January, the figure was 52.6.

However, analysts at Vital Knowledge stated in a report that the details of the report are “generally somewhat negative.”

They specifically pointed out that the prices paid category jumped 11.5 points month-over-month to 70.5, the highest level since June 2022. This data was released after the hot Producer Price Index report last Friday.

Tariff policies under Trump are the central focus of this survey, with the president emphasizing them as a core pillar of his economic policy. However, since the Supreme Court ruled in February that Trump’s use of emergency economic powers to impose so-called “reciprocal” tariffs was illegal, the outlook for these tariffs has been uncertain.

The White House subsequently introduced temporary tariff measures and insisted on enforcing other previously set rates, such as trade taxes on steel and aluminum under Section 232 of the 1962 Trade Expansion Act.

In a comment in the ISM report, one respondent said, “Today, commodities like steel and aluminum produced in the U.S. are at the highest prices globally and far above other countries.”

The respondent added that Section 232 tariffs “have had the opposite effect of what we intended: they raise prices while reducing demand and profitability for American manufacturers like us.”

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