Output growth falters and payrolls decline in February, as optimism slumps
and costs rise.
Please consider the S&P Global Flash US PMI® for February.
Key Findings
- Flash US PMI Composite Output Index: 50.4 (Jan: 52.7). 17-month low.
- Flash US Services PMI Business Activity Index: 49.7 (Jan: 52.9). 25-month low.
- Flash US Manufacturing Output Index: 53.8 (Jan: 51.8). 11-month high.
- Flash US Manufacturing PMI: 51.6 (Jan: 51.2). 8-month high.
Manufacturing picked up a bit, but more important services are now in contraction at a 25-month low.
And manufacturing was tariff front-running.
PMI Synopsis
US business activity growth came close to stalling in February, according to flash PMI® survey data, as a renewed fall in services output offset faster manufacturing growth. New order growth also weakened sharply and business expectations for the year ahead slumped amid growing concerns and uncertainty related to federal government policies.
The upturn in manufacturing output was also in part linked to the front-running of tariffs, hinting at merely a temporary boost. Input cost pressures meanwhile spiked higher, notably in manufacturing as suppliers passed on tariff-related price hikes and wage pressures persisted.
However, intensifying competition helped limit the pass through of selling prices in the services sector, where inflation sank to a near five-year low. Output and demand The headline S&P Global US PMI Composite Output Index sank to 50.4 in February from 52.7 in January, according to the preliminary ‘flash’ reading, which is based on approximately 85% of usual survey responses. The drop took the index to its lowest level for 17 months to signal a near-stalling of business activity.
Weakness was centered on the services economy, where output fell slightly in February to signal the first contraction of the sector for 25 months, representing a sharp contrast to the robust expansion seen late last year. New business inflows into the services sector came close to stagnation, showing the smallest rise for Service providers commonly linked the downturn in activity and worsening new orders growth to political uncertainty, notably in relation to federal spending cuts and potential policy impacts on economic growth and inflation outlooks.
Manufacturing output meanwhile rose for a second successive month, rising at the sharpest rate for 11 months, principally buoyed by higher new orders. However, new order growth slowed slightly, caused in part by a steepening loss of export orders. Many manufacturers also reported that the rise in production and demand was in part linked to front-running potential cost increases or supply shortages linked to tariffs.
Comments on the Flash PMI Data
- Chris Williamson , Chief Business Economist at S&P Global Market Intelligence said: “The upbeat mood seen among US businesses at the start of the year has evaporated, replaced with a darkening picture of heightened uncertainty, stalling business activity and rising prices.”
- “Optimism about the year ahead has slumped from the near-three-year highs seen at the turn of the year to one of the gloomiest since the pandemic. Companies report widespread concerns about the impact of federal government policies, ranging from spending cuts to tariffs and geopolitical developments. Sales are reportedly being hit by the uncertainty caused by the changing political landscape, and prices are rising amid tariff-related price hikes from suppliers.”
- “Whereas the survey was indicating robust economic growth in excess of 2% late last year, the February survey signals a faltering of annualised GDP growth to just 0.6%.”
- “While overall inflationary pressures remained muted, this reflected a squeezing of margins in the services sector as companies sought to absorb cost increases in order to offer competitive prices amid weakened demand. A concern is the sharp, tariff-related, jump in manufacturing input prices, which will likely either put further upward pressure on inflation in the coming months or further squeeze profit margins among US companies.”
Concern over tariffs and policy. Gee, who couldda thunk?
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