Supply manager sentiments positive despite tariff threat

Supply managers say the U.S. manufacturing economy is improving even as tariffs remain a pressing issue, according to Creighton University’s February Business Conditions Index. .The index increased to 52.0 from 51.1, its highest mark since last April. Twenty six percent cited tariffs as the greatest challenge, followed by 25 percent who cited finding and hiring qualified workers. “We’re seeing things moving in the right direction but not fast enough to get real excited about, but it’s better than being down,” said Ernie Goss, chair in regional economics at Creighton University’s Heider College of Business. The index tracking economic optimism over the next six months fell to 45.7 from 61.4 in January. “Due to concerns regarding global economic tensions and rising tariffs, only one-third of supply managers expect improving business conditions over the next six months,” Goss said. President Donald Trump recently implemented 25 percent tariffs on imports from Canada and Mexico, with Canadian energy products facing 10 percent import duties. Trump has also implemented 20 percent tariffs on imports of Chinese products. On March 4, Mexico President Claudia Sheinbaum said Mexico will respond to 25 percent tariffs from the United States with retaliatory tariffs on U.S. products. Canada is expected to institute tariffs on more than $100 billion of American goods over 21 days. China responded by imposing additional tariffs of up to 15 percent on imports of U.S. farm products such as beef, soy, pork and chicken. On average, manufacturing firms expect to increase prices 9.6 percent due to tariffs. U.S. goods remained less competitively priced due to the relatively strong dollar, pushing the export index to 44.6 from 41.7 in January. Supply managers continued to buy early from abroad, causing the import index to rise to a record 68.2 from 67.5 in January. The regional inventory index dropped to 51.4 from 52.8 in January as companies continued to add to their inventories amid expectations of higher costs from tariffs. Anxiety over rising tariffs pushed imports to a record high. According to the International Trade Administration, regional manufacturing exports increased 1.1 percent in 2024. “I remain concerned about the negative impact of tariffs on the cost of imported inputs and of retaliation on U.S. manufactured exports,” Goss said. The hiring index was stagnant at 51.2 in February. U.S. manufacturing firms are down about 100,000 jobs over the past year, with regional manufacturers down 8,000 jobs. The price gauge index increased to 63.2 from 62.0 in January, with the wholesale price index up for the fifth straight month. The Consumer Price Index increased 4.8 percent on an annualized basis over the past three months, while the Producer Price Index is up 3.6 percent over the same span. Goss said no federal rate change is expected this month, despite inflation being higher than the Federal Open Market Committee was hoping for in the first quarter.