U.S. ISM Manufacturing Index (February 2025)

The ISM Manufacturing Index shows sector expansion lost steam in February

• The ISM Manufacturing Index pulled back to 50.3 in February from 50.9 in January, a smidge behind expectations.
• Ten of 18 industries reported growth for the month – up from eight in January. In further signs on healthy momentum, 24% of manufacturing GDP contracted in February, down from 43% in January, 52% in December and 66% in November.
• However, demand conditions deteriorated. The new orders index flipped back into contraction (48.6), while new export orders growth decelerated (51.4 vs 52.4 in January). The backlog of orders shrank at a slower pace than in January (46.8 vs. 44.9) in a month where production growth slowed.
• The production index took a step back, falling to 50.7 from 52.5, suggesting production growth slowed. Employment also softened after last month's gain, falling back into contraction territory (47.6).
• Price gains accelerated sharply last month (62.4 vs. 54.9 in January), registering their strongest month of increases since June 2022.  

Key Implications

• A bit of a mixed bag from the manufacturing sector, with some warning signs mixed in. Momentum is carrying the day, with production continuing to grow and a smaller share of the sector reporting a contraction. However, underlying conditions are showing some cracks with new orders pulling back after a strong January, and tariffs already being cited as a driver of rising prices. 
• Much like last month, with tariffs looming the ISM manufacturing survey could end up being more informative of what was, rather than what will be. The deadline for broad tariffs on Canada and Mexico is tomorrow, with an additional 10% levy on China (beyond that from last month) also expected. For the manufacturing sector, new tariffs on the integrated North American market could have far-reaching effects, limiting what can be inferred from last month's figures.  

Disclaimer

This report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing, and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.