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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February 1, 2025: Welcome to the Dumbest Trade War in US History, What’s Next?
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February 10, 2025: Trump to Impose 25 Percent Tariffs on Steel and Aluminum, Expect Higher Prices
February 17, 2025: Five Republican Senators Caution Trump about Pain from Tariffs
February 19, 2025: Fed Minutes Show Doubt About Inflation Progress and a Concern Over Tariffs
I have an idea: Have TrumpSK issue $5,000 Stimmie checks funded by the savings from the War Mahcheen.
What could go wrong?
What will the economy look like in one month, in six months? Is there a recurrent pattern and a maximum time length of composite equity growth dependent on debt load and new credit creation before the market becomes fully saturated with optimistic end-buyers who are selling to the smartest sellers? That, in a nutshell, is the hypothesis of fractal economics.
Yeh sure Trump been in office for 1 month and just got a few more Cabinet level positions filled and this is claimed as causing a global slump.
How about the Truth that recession effect was delayed for election time by fantastic deficit spending under Biden. That and phony economic reports.
In any case interest rates are starting to respond to slump in demand. This will set stage for economic recovery across the Board.
By the way since 15 million illegals were so important to Housing how come it still is at 1978 levels.
Don’t forget the zombie companies that more and more are having to refinance at higher interest rates. That many smart ones locked in 2020 rates has blunted the Fed’s wimpy tightening, but I think they weigh on the economy measurably.
PMI is doing what Trump wants: higher industrial output/ lower consumption.
Everyday Trump does his best to bring on the next recession. The fallout from tariffs, mass layoffs, inflation and trade wars is going to hurt everyone.
I think it’s also just the sheer unpredictability. Hard to invest or purchase anything when you don’t know what crazy crap will drop next.
When in a Recession before—-was it denied by most– for long periods of time?
“The way to crush the bourgeoisie is to grind them down between the millstones of taxation and inflation.” — Vladimir Ilyich Lenin
https://www.azcentral.com/story/claythompson/2014/10/13/lenin-ronald-reagan-quotes/17226727/
This is widely quoted in histories and editorials. In 1974, in a speech while he was governor of California, Ronald Reagan said “Make no mistake about it: inflation is a tax and not by accident. Lenin once said, ‘Through inflation government can quietly and unobservedly confiscate the prosperity of its citizens.’”
The problem is that it seems that old V.I. never said it.
The “grind between millstones” phrase seemed to have come from economist John Maynard Keynes after an interview with Lenin. Keynes may well have been paraphrasing Lenin, but there is no evidence he ever actually said it.
Lenin also supposedly said, “We will hang the capitalists with the rope that they sell us,” but, again, there is no evidence that he ever really did. Besides, it would hardly do to go around touting the merits of an economic system that couldn’t make its own rope.
What do you MEAN? I LOVE parsing through threatened (but not realized) trade barriers and tariffs! Glued to my former twitter 24/7, waiting for the next reality TV rants, what could be more business-friendly? I’ve already spent my DOGE rebate checks on new hires and crypto! We’re all gonna be rich!
maybe you picked the wrong week to stop sniffing glue….
There will always be pain before pleasure when it comes to unwinding political graft and mischievous that stretches back decades and across both sides of the isle. Don’t get me wrong, one side has a pushed this modus operandi at a whole different level outside of the Nixon administration since TR, but the other side has done little or nothing to reverse any of it when it would have been a lot less painful to actual people. Just an e mail from a group I am part of because of a conference I attended and it was about the Trump admin shutting down access to funds a private bank(s) for green energy and that we needed to start finding a way to fight it and drafting a memo etc. Of course there was an article used to help frame all of this from Politico. Wild just how controlled in certain and echo chamber like so much of what emanates from DC has become.
truly a sense of entitlement like no other. I read the people being laid off from government complaining they were losing “a job for life”. with that attitude its probably best they go.
I learned long ago there are no “Jobs for life” in the private sector. The only true “job for life” is taking care of your own health, and you are the employer, employee and boss of your own life.
Its good they are being jarred out of their complacency and exposed to the reality of the world outside D.C.
I hope Trump et al is truly committed to moving large portions of the government out of D.C. and into flyover country so they can understand just what they have created and now have to live in it…
Can American democracy survive? Only if the economy tanks.
The globe won’t be selling to USA. USA may not sell much to the globe either.
America did just fine being a stand alone nation prior to world war I, I’m sure we can do it again and be stronger and better for it.
we possess bountiful minerals, timber and strong people who need to be challenged once again to create a truly self sustaining life system.
If by “strong” people you mean the 73 million socialists on welfare, good luck with that…..oh and that number will go up to 80+ million by 2030. That’s the difference between now and 1918.
Yes, if you’d like to be a dirt farmer.
You might want to go look up what percentage of the country worked in agriculture in 1910 before you advocate going back to that economy.
I agree with the thrust of your statement. But before WWI, the US had quite high tariffs that fully funded the Federal govt and yet had fairly robust international trade. It would have been better for farmers in the South and Midwest if the tariffs had been lower; I’m not arguing for tariffs. But what Trump is doing with tariffs for sake of negotiation is quite mild compared to the Gilded Age tariffs, and may foster trade in the long run. (Totalitarian China the exception.)
The US benefits from being such a large (somewhat free) market that mild tariffs are not the danger they would be to smaller economies. Free trade is the ideal, but we’ve never done more than approximate it, and what Trump is doing may not make it worse in the long run.
Human brain caloric gap (the brain is ~7% or body weight yet consumes over 35% of calory consumption) favors humans’ innate laziness to seek a “kinder-gentler” way even when we’d really know better upon full reflection (See: Daniel Kahneman’s “Type 2 vs 1 thinking). So people aka: voters vote for unworkable simple answers. See: “Reductionist Fallacy”.
Sad, but to be expected. Even the Greeks were writing that human ignorance often harms society more than evil people.
Evolution is perfectly capable of going down failed alleys. One obvious one would be too much complexity for the aggregate processing capacity of the ambient humans. Then comes a Malthusian quick return to the needed level of relative simplicity, to re-achieve equilibrium. Relative simplicity here doesn’t mean getting back to raising our own organic vegetables. Rather, in this meat-world, it hurts, to any degree possible, until that equilibrium arrives.
The brain receives an outsized portion of the net energy input, because it allocates the energy. It is the most important organ, without the brain and its nervous system and hormonal systems, bodily functions would immediately go out of balance and the body would die.
It makes sense not to skimp on resources to important systems.
Innate laziness comes not from the brain, but from the mind a totally different construct, when the brain dies, the brain remains, but the mind is no longer contained.
where it goes is the subject of humanity’s conjecture and wonder since we began to traverse this world upright and paint on caves.
The mind may be an electrical field resident in and confined by the brain, this field is no longer present upon death. Electricity stimulates the muscles into action, and the heart into beating. We may be an energy being constrained by the material, energy learning to manipulate matter.
Financial markets undeterred and unrelenting.