Global Manufacturing Expansion Continues, Input Costs Rise

The global manufacturing sector has expanded for the second consecutive month, signaling a continued recovery in the sector. The S&P Global US Manufacturing PMI rose to 51.6 in February 2025, surpassing market expectations and indicating a modest but steady expansion. This growth is supported by factory output growth, new order growth, and employment gains. However, the sector is also grappling with rising input costs, which could impact its sustainability in the long run.

Factory output growth has been a significant driver behind the overall manufacturing expansion. The S&P Global US Manufacturing PMI showed that factory output grew for the second straight month at the fastest pace in nearly a year in February 2025. This growth is a positive sign for the sector, as it indicates that manufacturers are producing more goods to meet demand. However, this growth is also putting upward pressure on input costs, as manufacturers are competing for raw materials and other inputs.

New order growth has also been a key factor behind the manufacturing expansion. Although new order growth slowed in February 2025, it remained in expansionary territory, indicating continued demand for manufactured goods. This growth in new orders supports the overall manufacturing expansion, as it signals that manufacturers are receiving more orders from customers. However, the slowdown in new order growth could indicate that demand is starting to ease, which could impact the sustainability of the manufacturing expansion.

Employment gains have also contributed to the manufacturing expansion. While employment gains nearly stalled in February 2025, the manufacturing sector has seen consistent job creation since July 2024. This growth in employment contributes to the overall manufacturing expansion, as it indicates that manufacturers are hiring more workers to meet demand. However, the slowdown in employment gains could indicate that manufacturers are becoming more cautious about hiring, which could impact the sustainability of the manufacturing expansion.

However, the manufacturing sector is also grappling with rising input costs. Input cost inflation reached its highest level since November 2022 in February 2025, indicating that some suppliers are already adjusting prices upward in response to expected tariffs. This inflationary pressure could impact the sustainability of manufacturing growth, as manufacturers may struggle to pass on these higher costs to consumers. Additionally, labor shortages and geopolitical headwinds could further exacerbate these challenges.

To mitigate the impact of rising input costs, manufacturers can employ several strategies. Diversifying supply chains and sourcing can help manufacturers reduce dependence on a single source or region, improving resilience to disruptions and price fluctuations. Improving inventory management can help manufacturers reduce stockouts and minimize the impact of price fluctuations. Investing in technology and automation can help manufacturers improve productivity, reduce waste, and lower input costs. Negotiating with suppliers and passing on costs can help manufacturers secure better pricing or alternative materials. Implementing energy efficiency measures can help manufacturers reduce their energy expenses, further mitigating the impact of rising input costs.

In conclusion, the global manufacturing sector has expanded for the second consecutive month, supported by factory output growth, new order growth, and employment gains. However, the sector is also grappling with rising input costs, which could impact its sustainability in the long run. Manufacturers can employ several strategies to mitigate the impact of rising input costs, including diversifying supply chains, improving inventory management, investing in technology and automation, negotiating with suppliers, and implementing energy efficiency measures. By doing so, manufacturers can better navigate the challenges posed by rising input costs and maintain their profitability.