ISM manufacturing activity holds up as uncertainty rises
|The market is primarily concerned with developments in the Middle East this morning. The latest ISM data for February edged down just 0.2 points to 52.4 but remained in expansion, supported by strength in new orders, production, and supplier deliveries, while employment and inventories—though still in contraction—improved enough to pose less of a drag on the headline.
Source: Institute for Supply Management and Wells Fargo Economics
Geopolitical Implications
Historically, spikes in geopolitical uncertainty or U.S. military activity tend to coincide with a near-term softening in business sentiment as firms delay orders, hiring, or investment decisions amid heightened uncertainty. That said, the effect is typically modest and short-lived, unless accompanied by sustained increases in energy prices, material supply disruptions, or tighter financial conditions.
In prior episodes, the ISM has generally stabilized once uncertainty fades and firms gain clarity, suggesting that sentiment effects alone rarely translate into a durable downturn in manufacturing activity. As seen in the chart above, manufacturing activity is influenced much more by cyclical trends than Iranian-related geopolitical conflicts.
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