Employees at a trailer manufacturing facility in Portland, Oregon, U.S. Photographer: Meg Roussos/Bloomberg via Getty Images
(EPICSTORIAN) — US manufacturers reported a sharp decline in new orders and hiring in February, intensifying concerns about slowing industrial growth.
The Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI) dropped to 50.3 from 50.9 in January, hovering just above contraction levels.
A significant drop in new orders, from 55.1 to 48.6, signaled weakening demand across key industries. Economic projections reflect the strain.
The Federal Reserve Bank of Atlanta revised its GDP forecast, estimating a 2.8% decline in first-quarter economic activity—far steeper than the 1.5% contraction projected days earlier, according to Sam Fleming, Financial Times.
Weak trade figures, sluggish construction, and declining factory output contributed to the downgrade.
Uncertainty Over Tariffs Disrupts Business Planning
Trade policies continue to weigh on manufacturers as the US moves toward imposing tariffs on key trading partners. Plans to enforce a 25% tariff on Mexican and Canadian imports take effect Tuesday, while duties on Chinese goods are set to double to 20%.
Commerce Secretary Howard Lutnick acknowledged ongoing discussions regarding final tariff details. “The situation remains fluid,” he said Sunday, leaving businesses uncertain about potential cost increases and supply chain disruptions.
Rising Costs Pressure Industrial Output
Higher costs are squeezing manufacturing margins. A key ISM measure tracking prices paid by manufacturers surged last month, reflecting increased material costs and inflationary pressures.
“Several industries are seeing orders dry up due to uncertainty over trade policy,” said Oliver Allen, Senior US Economist at Pantheon Macroeconomics.
“Much of the manufacturing activity from October to January was driven by businesses rushing to complete orders before tariffs took effect. That momentum now appears to be fading.”
Economic Growth at Risk
Revised GDP projections indicate a sharp downturn from the 2.3% annualized growth recorded in the previous quarter. Consumer spending remains a bright spot, but industrial output and business investment are slowing.
Goldman Sachs analysts held their first-quarter GDP estimate at 1.6% annualized, maintaining that underlying economic strength could offset some of the trade-related challenges.
Jack Kleinhenz, Chief Economist at the National Retail Federation, pointed to growing uncertainty.
“The US economy started 2025 with solid momentum, but shifting policies on tariffs, immigration, and regulation are creating crosscurrents that make future growth harder to predict,” he said.
Manufacturers Face a Challenging Road Ahead
The outlook for the manufacturing sector remains uncertain. Trade policies, inflationary pressures, and declining demand could shape industrial performance in the coming months.
A prolonged slowdown would have broader economic implications, adding to recession concerns if conditions worsen.
For now, manufacturers are bracing for continued volatility, adjusting operations amid shifting policies and uncertain market conditions.
