• Prelim was 51.6
• January final was 51.2

There was some real optimism in January as prospects for the year ahead hit the highest in three years and that continued into February despite some turmoil around tariffs. However the comments in the report suggest the strength was driven by inventory building ahead of tariffs.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence

“A rise in the PMI to a 32-month high signals an improvement in the health of the manufacturing sector which may only be skin deep.

“Although manufacturing production grew at the strongest rates since May 2022 and new orders increased at the best pace in a year, there’s much to suggest that this improvement could be short lived. Production and purchasing were often buoyed by companies and their customers building inventory to beat price hikes and supply issues caused by tariffs. Exports have meanwhile slumped and supplier delivery delays were the most common since October 2022 amid disruptions to trade caused by tariff worries.

“Business optimism about the year ahead has consequently fallen compared to the buoyant mood evident in January, with February seeing an increase in the number of companies citing concerns over tariffs and other policies introduced by the new Trump administration.

“Worries have noticeably swelled in relation to the inflationary impact of tariffs, which were widely reported as having caused factory input costs to spike higher in February. These higher costs are being passed on to customers, resulting in the strongest factory gate price inflation recorded for two years, which manufacturers fear may in turn not only damage sales in the coming months but also encourage the Fed to take a more hawkish view of inflation.”

The ISM manufacturing report is due at the top of the hour (along with construction spending).

This article was written by Adam Button at www.forexlive.com.