Input Stories

In March, the U.S. manufacturing sector fell back into contraction territory after two consecutive months of growth, with the ISM Manufacturing^® PMI decreasing to 49.0% from 50.3% the prior month. Customer demand and output weakened, while inputs strengthened further as a temporary move to head off increased tariff rates. The New Orders and Employment Indexes fell further into contraction territory, declining to 45.2% and 44.7%, respectively. Production contracted after two consecutive months of expansion, weakening to 48.3%, 2.4 percentage points lower than February. Meanwhile, inventories (53.4%) grew at a faster pace in March, which is not a positive sign amid slowing demand.

The New Orders Index contracted for the second consecutive month and at a faster pace than the prior month, a 3.4 percentage point drop from February. The index hasn’t shown consistent growth since a 24-month streak of expansion ended in May 2022, and respondents noted a clear decline in demand from February, with three of the six major sectors—machinery, transportation equipment and chemical products—reporting a decline in new orders.

The New Export Orders Index dropped back into contraction territory to 49.6% after two consecutive months of expansion, 1.8 percentage points lower than February. Panelists commented on Canadians’ lack of desire to purchase U.S. goods as one of the reasons for contraction. Meanwhile, the Imports Index exhibited growth for a third consecutive month but at a slower pace than February, dropping 2.5 percentage points to 50.1% in March. Buyers continued to pull forward deliveries as much as possible to get ahead of tariffs.

The Employment Index contracted for the second consecutive month and at a faster pace than the prior month, a 2.9 percentage point drop from February. Of the six largest manufacturing sectors, none reported increased employment. Companies primarily reduced headcounts through attrition and hiring freezes, rather than layoffs.

The Prices Index rose 7 percentage points to 69.4%, indicating raw materials prices increased for the sixth straight month in March to its highest reading since June 2022, driven by the dramatic rise in commodity prices as a result of recently imposed tariffs. Steel, aluminum, copper, corrugate and plastic resins registered increases. Forty-six percent of companies reported paying higher prices, up from more than 31% in February and nearly 21% in January.