US Manufacturing Sector Hits 17-Month High... Will Interest Rate Cuts Be Delayed?

February Manufacturing PMI 51.5... Factory Production Increase

The U.S. manufacturing sector is showing rapid improvement. As positive momentum continues in the U.S. economy, expectations are growing that the Federal Reserve (Fed) will delay the timing of interest rate cuts.

On the 22nd (local time), S&P Global announced that the U.S. Manufacturing Purchasing Managers' Index (PMI) for February rose to 51.5 from 50.7 last month. This not only far exceeded expert forecasts (50.5) but also marked the highest level in 17 months.

The manufacturing PMI, a key leading economic indicator, signals expansion when above 50 and contraction when below 50. Since the U.S. manufacturing sector entered an expansion phase by surpassing 50 last month, it has continued to improve at a pace exceeding market expectations this month as well. New orders increased significantly, pushing factory production to its highest level in 10 months.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, analyzed, "Signs that inventory reduction policies are slowing are helping production growth," adding, "Corporate confidence in next year’s outlook within the manufacturing sector is also increasing."

The services PMI fell from 52.5 last month to 51.3, below market expectations (52.4). Although it is the lowest level in three months, it still remained above 50, indicating continued expansion. The U.S. composite PMI for February was recorded at 51.4, down 0.6 points from the previous month due to the decline in the services PMI.

With the manufacturing sector improving, the U.S. economy is maintaining broad-based growth, raising hopes for a soft landing. The U.S. Gross Domestic Product (GDP) is expected to grow by more than 2% in the first quarter of this year.

However, following the Fed’s reaffirmation of a cautious stance on rate cuts and the continued expansion of the economy, there are views that the pivot point (direction change) may be delayed beyond expectations.