U.S. manufacturing activity expanded for the second consecutive month in February, signaling renewed momentum in industrial output, but rising metal prices tied to trade policy uncertainty are straining input costs and dampening demand.
- ISM Manufacturing Index rose to 51.8 in February, up from 50.9 in January
- Raw materials price index climbed to 64.2, the highest since late 2023
- Aluminum prices rose 7.3% month-over-month; copper up 5.8%
- Crude oil (CL=F) averaged $87.60/barrel in February
- Gold (XAU=USD) hit $2,340/oz amid geopolitical uncertainty
- VIX index rose to 18.5, reflecting increased market volatility
The U.S. manufacturing sector posted a second straight monthly gain in February, marking the first sustained two-month expansion since early 2025. The ISM Manufacturing Index rose to 51.8, up from 50.9 in January, indicating growth after a period of contraction in late 2024 and early 2025. This rebound reflects increased production, new orders, and employment, particularly in durable goods and machinery segments. The expansion suggests improving business confidence and a rebound in industrial activity, supported by moderate demand and easing supply chain bottlenecks. However, underlying pressures remain, notably in input costs. The price index for raw materials surged to 64.2 in February, the highest since late 2023, driven by elevated premiums on aluminum, copper, and steel. These increases are linked to ongoing tariff adjustments on imported metals, which have introduced volatility into sourcing strategies. Commodity markets reflected this instability: the price of LME aluminum climbed 7.3% month-over-month, while copper futures on COMEX rose 5.8%, and the gold price (XAU=USD) reached $2,340 per ounce amid safe-haven demand related to geopolitical tensions. Energy prices also rose, with crude oil (CL=F) averaging $87.60 per barrel, contributing to broader inflation concerns. The combination of rising input costs and uncertain trade policies is compressing profit margins for mid-sized manufacturers. The VIX index, a measure of market volatility, jumped to 18.5—the highest in three months—indicating heightened risk sentiment among investors. Companies are now balancing the benefits of production growth against the risks of tariff-driven price shocks and potential demand slowdowns in key sectors like automotive and construction.