The U.S. manufacturing and services sectors expanded at their fastest pace in 3.5 years during February, according to the ISM report, defying winter storm-related headwinds. The survey’s composite index climbed to 58.2, signaling robust demand and sustained economic momentum.
- ISM composite index reached 58.2 in February, its highest since September 2022
- Services sector index at 59.3; manufacturing at 54.1, both above expansion threshold
- New orders in services: 61.8; manufacturing: 56.4, signaling strong demand
- Employment in services rose to 52.5, fastest pace since early 2023
- SPY up 0.8%, CL=F up 1.4%, VIX down 3.2% on stronger growth data
- 10-year Treasury yield increased to 4.21% as rate cut expectations delayed
The U.S. economy displayed surprising resilience in February, with the ISM composite index rising to 58.2—the highest level since September 2022—indicating continued expansion across key sectors. Despite disruptions from winter storm Fern and persistent trade barriers, the services sector posted a reading of 59.3, while manufacturing reached 54.1, both above the critical 50 threshold that separates growth from contraction. The data reflects stronger demand, with new orders surging to 61.8 in services and 56.4 in manufacturing, suggesting elevated business confidence. Employment in the services sector expanded at its fastest pace since early 2023, with the index reaching 52.5. Meanwhile, supplier deliveries slowed, pointing to supply chain tightness, while input prices rose modestly, suggesting inflationary pressures remain contained. Equity markets reacted favorably, with SPY gaining 0.8% in pre-market trading. Energy stocks, tracked by CL=F, rose 1.4% as stronger economic activity bolstered near-term demand expectations. The VIX index, a gauge of market volatility, declined 3.2% to 16.7, reflecting reduced risk sentiment amid the positive data. The stronger-than-expected report strengthens the case for the Federal Reserve to maintain its current policy stance, with rate cut expectations shifting to later in 2026. Bond yields rose slightly, with the 10-year Treasury yield climbing to 4.21%, as investors price in sustained demand and delayed easing.