After two consecutive months of expansion preceded by 26 straight months of contraction, economic activity in the manufacturing sector contracted in March, according to ISM' latest report released on April 1.
The Manufacturing PMI registered 49% in March; 1.3 percentage points lower compared to the 50.3% recorded in February.
The overall economy continued in expansion for the 59th month after one month of contraction in April 2020.
"Demand and production retreated and destaffing continued, as panelists' companies responded to demand confusion." said Timothy R. Fiore, of ISM, in a statement. "Prices growth accelerated due to tariffs, causing new order placement backlogs, supplier delivery slowdowns and manufacturing inventory growth. Forty-six percent of manufacturing gross domestic product (GDP) contracted in March, up from 24% in February."
The Index highlights are as follows:
The Supplier Deliveries Index indicated a continued slowing of deliveries (though at a slightly slower rate of change), registering 53.5%, 1 percentage point lower than the 54.5% recorded in February.
The New Orders Index contracted for the second month in a row following a three-month period of expansion; the figure of 45.2% is 3.4 percentage points lower than the 48.6% recorded in February.
The Production Index was at 48.3%, which is 2.4 percentage points lower than February's figure of 50.7%.
The New Export Orders Index reading of 49.6% is 1.8 percentage points lower than the reading of 51.4% registered in February.
The Imports Index continued in expansion in March registering 50.1%, 2.5 percentage points lower than February's reading of 52.6%.
The Prices Index registered 69.4%, up 7 percentage points compared to the reading of 62.4% in February.
The Backlog of Orders Index registered 44.5%, down 2.3 percentage points compared to the 46.8% recorded in February.
The Employment Index registered 44.7%, down 2.9 percentage points from February's figure of 47.6%.
What Respondents are Saying
- "Complex markets saw a surge in volume buying in anticipation of 2025 being slightly better than 2024. In March, however, all markets saw a slowdown, with fear and inventory stocking to hold through a potential crisis." [Chemical Products]
- "Acute shortages continue to impact supply chain continuity. Chinese restrictions on critical minerals such as germanium have caused major shortages, resulting in all supply needed in 2025 already assumed — and, not surprisingly, significant price increases as a result. Tariffs are causing minor ripples at the moment in securing supply, with purchase order terms narrowing due to uncertainties. A&D (aerospace and defense), which has been very resilient, is starting to see questionable medium- to long-term demand due to governmental policy, including retaliatory actions taken by foreign countries with foreign military sales." [Transportation Equipment]
- "Customers are pulling in orders due to anxiety about continued tariffs and pricing pressures." [Computer & Electronic Products]
- "New order levels have increased and are better than expected. We suspect that our customers are trying to build inventory at current prices to get ahead of expected tariff and related cost increases. We expect this surge in demand to be short-lived." [Fabricated Metal Products]
- "Demand has been stable, consistent with last year. No evidence of growing demand. Tariff impacts and mitigation strategies are a daily conversation." [Electrical Equipment, Appliances & Components]
- "Newly implemented tariffs are significantly impacting gross profits. Canada's new tariffs on U.S. goods are significantly impacting orders from that country. Quotes and sales are lower from Europe due to the threat of retaliatory tariffs." [Miscellaneous Manufacturing]
- "Worldwide economic instability has really begun to impact our oil and gas business. Aside from the change in the U.S. administration, the economies of China, India and Europe are drivers in what we believe is the next cyclical trough." [Petroleum & Coal Products]
