Growth in the US manufacturing sector slowed in February, with new data showing the pace of expansion easing to its weakest level in seven months amid falling exports, tariff pressures and weather disruption.
The latest S&P Global US Manufacturing PMI registered 51.6 in February, down from 52.4 in January, signalling continued improvement in operating conditions but at a more modest rate. Any reading above 50 indicates expansion.
While both output and new orders continued to rise, the pace of growth softened as manufacturers reported weaker demand and disruptions caused by severe weather conditions.
Exports fall for eighth straight month
A key drag on performance came from international trade. Indeed, new export orders declined for the eighth consecutive month, with the downturn accelerating to its steepest level since April 2025. Tariffs were widely cited by manufacturers as the main factor behind the decline, particularly affecting sales to Canada.
As a result, companies relied more heavily on domestic demand to support sales during the month.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said the latest data pointed to a cooling in overall economic momentum.
“February saw US manufacturers report the weakest expansion since last July, in a further sign that the overall pace of economic growth has moderated in recent months,” he said.
Hiring stalls as firms remain cautious
Manufacturers also adopted a cautious approach to hiring. Employment growth was minimal in February as firms expressed concerns over the strength of future order books and sought to manage excess capacity. Backlogs of work declined during the month, further reducing the need for additional staff.
Supply chain pressures also resurfaced, with companies reporting delays caused by low stock availability, transportation issues and weather-related disruption among suppliers.
These challenges prompted firms to draw down input inventories for the first time in seven months.
Cost pressures persist but price growth slows
Input costs continued to rise sharply during February, driven by tariffs and higher raw material prices. However, inflation remained below the peaks recorded during 2025.
Despite the cost pressures, manufacturers faced strong competitive pressures that limited their ability to pass on higher expenses to customers. As a result, selling price inflation eased to its slowest pace in more than a year.
Williamson said this trend could signal pressure on company margins.
“Stiff competition has limited the pass through to selling prices, which rose in February at the slowest rate for over a year,” he said. “While this is good news for inflation, it hints at downward pressure on profits.”
Optimism improves despite uncertainty
Despite the softer growth environment, business sentiment improved. In fact, manufacturers reported the strongest level of optimism about the year ahead in eight months, supported by expectations of new product launches and business expansion plans.
However, uncertainty around the political environment and trade policy continues to weigh on decision-making around hiring and investment.
Williamson added that the full picture of economic conditions may become clearer once weather disruptions ease in the coming months.
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