Prices surge to highest level since 2022 as Middle East conflict escalates: PMI

Core Insights - Manufacturing prices have reached their highest levels since June 2022 due to tariff and inflationary pressures, yet manufacturing continues to expand driven by new orders and backlog growth [1] Group 1: Manufacturing Index and Demand Indicators - ISM's Purchasing Managers' Index (PMI) registered at 52.4% in February, a slight decline of 0.2 percentage points from January, indicating continued expansion as a PMI above 50% suggests growth [2] - Three out of four demand indicators—new orders, backlog of orders, and new export orders—have been expanding since the beginning of 2026, with notable growth in sectors such as computer and electronic products, chemical products, machinery, and transportation equipment [2] Group 2: Inventory and Order Trends - Customer inventories are reported to be "too low," which typically signals potential for increased orders and positive growth, as noted by Susan Spence, chair of ISM's Manufacturing Business Survey Committee [3] - The sentiment among manufacturing executives has improved, with a positive-to-negative comment ratio of 2-to-1, reflecting a more optimistic outlook compared to previous months [4] Group 3: Employment Trends - The ratio of hiring versus headcount reduction has improved to 1-to-1.4, indicating a more positive trend in employment despite ongoing concerns about tariffs affecting hiring decisions [5] Group 4: Price Index Concerns - The prices index registered at 70.5% in February, an increase of 11.5 percentage points from the previous month, driven primarily by rising steel and aluminum prices along with tariffs impacting the entire value chain [6] Group 5: Overall Sentiment and Future Uncertainty - Overall sentiment among manufacturing executives is positive, although there are concerns regarding potential uncertainty stemming from a recent Supreme Court ruling that could affect tariffs [7]