The February 2026 U.S. ISM PMI reports revealed robust growth in both the manufacturing and services sectors, signaling a strong recovery in economic activity. The ISM Manufacturing PMI registered at 52.4, marking the second consecutive month of expansion after a prolonged period of contraction throughout most of 2025. Notably, new orders reached 55.8, production was at 53.5, and the backlog of orders surged to 56.6, the highest since mid-2022 [1].
The ISM Services PMI was even more impressive, climbing to 56.1 in February from 53.8 in January. This represents the highest reading since July 2022 and marks the 20th consecutive month of expansion in the services sector. Business activity accelerated to 59.9, and new orders surged to 58.6. All ten reported sub-indexes were in expansion territory for the first time since March 2021 [1].
Despite these positive headline numbers, a significant concern emerged regarding inflation. The Prices Paid Index in manufacturing jumped to 70.5 in February, an increase of 11.5 points from January's 59. This is the highest level since the peak of the 2022 inflation crisis and far exceeded economist expectations of 60.0. The surge in prices paid is attributed primarily to tariffs, which are driving up costs for U.S. businesses [1].
The strong PMI readings suggest a resilient U.S. economy, but the sharp rise in input costs presents a challenge for traders and policymakers. The Federal Reserve remains cautious, as elevated prices paid could signal persistent inflationary pressures, potentially impacting future monetary policy decisions [1].
CONCLUSION
The February ISM PMI reports indicate solid expansion in both manufacturing and services, highlighting a resilient U.S. economy. However, the sharp increase in prices paid, driven by tariffs, raises concerns about inflation and may influence the Federal Reserve's policy stance. Market participants should closely monitor these inflation signals as they could affect future economic and monetary developments.