LIVE MARKETS-February factory activity: Will the real PMI please stand up?

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FEBRUARY FACTORY ACTIVITY: WILL THE REAL PMI PLEASE STAND UP?

March began on Monday with a good, old-fashioned PMI duet.

The upshot is that goods makers fared reasonably well last month; just how well depends on who you're asking.

The Institute for Supply Management's (ISM) Purchasing Managers' Index (PMI) USPMI=ECI showed the expansion of activity at U.S. factories decelerated a bit in February.

The index shed 0.2 points to land at 52.4, a stronger reading than the 51.8 analysts expected.

ISM's manufacturing PMI has now enjoyed two consecutive months north of the magic PMI level of 50, the dividing line between monthly contraction and expansion.

Wandering into the weeds, new orders and production lost a bit of momentum, while employment and inventories remained in contraction. Backlog jumped 5 points to 56.6, and exports moved firmly into expansion.

But the prices paid element - an inflation predictor - was the attention-grabber, surging 11.5 points to 70.5, its hottest reading since June 2022.

"This is the second straight decent reading, after a sharp jump in January took the index to its highest level in three-and-a-half years," says Oliver Allen, senior U.S. economist at Pantheon Macroeconomics.

"That said, manufacturing continues to face some major headwinds," Allen adds. "The ISM survey’s commentary continues to cite considerable disruption and elevated costs due to tariffs. Consumer demand also now seems to be softening, likely weighing further on demand for manufactured goods."

Commentary from ISM's survey participants is littered throughout with worries over tariffs and geopolitical instability, but also includes upbeat phrases like "overall orders are improving" and "positive indications for growth opportunities."

But S&P Global also had its say, with its final take on February manufacturing PMI USMPMF=ECI, which printed at 51.6, a slight improvement over its initial "flash" reading of 51.2, but 0.8 points weaker than January's final take.

"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," writes Chris Williamson, S&P Global's chief business economist. "Businesses were often disrupted by extreme weather,
which has clouded insights into the underlying strength of economic growth and suggests we may see some rebound once the weather clears."

"However, uncertainty over the political environment, and the tariff picture in particular, remains a drag on confidence," Williamson adds.

The S&P Global and ISM indexes differ from each other in the weight they apply to the various components (new orders, employment, etc).

Here's how closely they agree (or not). The dueling PMIs are set to meet again on Wednesday, when they spar over the services side of the coin.

(Stephen Culp)

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