US Manufacturing Remained in Expansion in March with New Orders Growing and Prices Continuing to Increase

Economic activity in the US manufacturing sector expanded in March for the third consecutive month, according to the latest ISM Manufacturing PMI Report. The Manufacturing PMI registered 52.7 percent in March, a 0.3 percent increase compared with February.

Of the five subindexes that make up the PMI, the New Orders Index indicated slower growth compared with the previous month, the Production Index grew at a faster rate, and the Employment and Inventories indexes remained in contraction. This month also marks the first report with panelists citing the Iran war as a new impact to their business, along with ongoing uncertainty with US economic policy, despite the recent Supreme Court ruling striking down International Emergency Economic Powers Act (IEEPA) tariffs.

Regarding demand indicators, the New Orders Index expanded for the third straight month but was down 2.3 percentage points compared with February. The Backlog of Orders Index registered 54.4 percent, also down 2.2 percentage points compared with February. The Customers’ Inventories Index remains in “too low” territory, with a 1.3 percentage point increase compared with February’s reading of 40.1 percent. The New Export Orders Index slipped into slight contraction, with a reading of 49.9 percent.

Regarding output, the March reading of the Production Index at 55.1 percent is 1.6 percentage points higher than February’s reading and reflects expansion for the fifth month in a row. The Employment Index decreased by 0.1 percentage point and remains in contraction.

Inputs (defined as supplier deliveries, inventories, prices, and imports) had mixed results. The Supplier Deliveries Index is up 3.8 percentage points from February, indicating further slowing for the fourth month in a row. The Inventories Index contracted at a faster rate, down 1.7 percentage points compared with February’s reading of 47.1 percent. The Prices Index took another big leap—to 78.3 percent, up 7.8 percentage points relative to February, which itself was up 11 percentage points. In the last two months, the Prices Index has increased 19.3 percentage points to reach its highest level since a reading of 78.5 percent in June 2022. The Imports Index lost 2.3 percentage points for a reading of 52.6 percent.

Sixteen percent of the sector’s gross domestic product (GDP) contracted in March, compared with 21 percent in February, and the percentage of manufacturing GDP in strong contraction, defined as a composite PMI of 45 percent or lower, increased to 4 percent, compared with 1 percent in February. Of the six largest manufacturing industries, four (Transportation Equipment; Computer & Electronic Products; Machinery; and Chemical Products) expanded in March.

The 13 manufacturing industries reporting growth in March, listed in order, are: Printing & Related Support Activities; Primary Metals; Transportation Equipment; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Textile Mills; Computer & Electronic Products; Fabricated Metal Products; Machinery; Paper Products; Nonmetallic Mineral Products; Wood Products; and Chemical Products. The three industries reporting contraction in March are: Plastics & Rubber Products; Furniture & Related Products; and Food, Beverage & Tobacco Products.

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