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Report On Business® Roundup: March Manufacturing PMI®

April 01, 2025
By Dan Zeiger

On the eve of an announcement of reciprocal duties on imported products that the Trump administration is touting as “Liberation Day,” the Manufacturing ISM® Report On Business® data for March revealed the degree that companies are already tariff weary.

The Manufacturing PMI® reading of 49 percent released on Tuesday indicated that recent momentum has stalled, with the sector returning to contraction territory after two months in expansion. The composite figure led a suite of subindex numbers heading in the wrong direction.

After detailing the PMI®, Prices, New Orders and Employment index readings, CNBC analyst Rick Santelli said, “Here’s something we want to pay attention to: Every single number here except the (Prices Index) is sequentially lower. That’s unfortunate because prices paid is the only number you want to be sequentially lower.”

The data indicates mild contraction and is not alarming, at least not yet, Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee, said on Tuesday. But a positive trend — whether in demand (new orders, backlogs and exports), outputs (production and employment) or inputs (inventories and prices) — is hard to find in the data.

“A couple of months ago, I said that we were in the beginnings of a growth period,” Fiore said on ISM’s LinkedIn Live broadcast. “I can’t say that anymore. Based on what I was seeing (two months ago), it looked like demand was coming back. We were confident, and sentiment was good. The new administration was coming in was expected to be business friendly and eliminate regulation. … But (sentiment) has changed due to the use of tariffs.”

More than two-thirds (68 percent) of Manufacturing Business Survey panelists’ headline comments were on tariffs, particularly the confusion related to the on-again, off-again duties on products from Canada and Mexico. But Fiore expects the duties announced on Wednesday to be lasting, based in part on White House aide Peter Navarro’s claim that they will raise US$6 trillion in federal revenue over the next 10 years.

That will at least give companies and supply executives clarity, Fiore told a conference call of reporters on Tuesday: “There have been so many unknowns that it feels like we’re finally waging into the battle, where some of these unknowns will become clearer.”

He continued, “Recently, we had a comment from a panelist, who said something to the effect that it’s time for the White House to stop talking about this and just do it. It looks like that’s finally where we’re at, and we need to get there because this is clearly a policy of the administration. We’re going down this path, so let’s get on and see what the repercussions are.”

Tariffs impacts were all over the ISM® Report On Business® data in March: The Prices Index reading of 69.4 percent was the highest since June 2022 (78.5 percent), and Fiore said that the 21.1-percentage point increase over the past six months is due to tariffs.

Among the five subindexes that directly factor into the PMI®, only Supplier Deliveries (53.5 percent) and Inventories (53.4 percent) were in expansion territory. But the slower deliveries and higher stock levels were due to companies trying to get ahead of tariffs, and those conditions will reverse after duties are enacted, Fiore said.

Demand was even more sluggish, with the New Orders Index at 45.2 percent, its lowest level since May 2023 (43.4 percent). The Employment Index also contracted more strongly, at 44.7 percent. Companies are not investing in personnel or capital equipment due to uncertainty.

For those desperate to find a positive, Fiore said, it’s a minor miracle that the New Export Orders Index decreased to just 49.6 percent, a 1.8-percentage point decrease compared to the previous month, given the level of friction between the United States-Mexico-Canada agreement partners. Wrote a panelist in Food, Beverage & Tobacco Products, “(S)lower-than-normal sales in Canada, and concerns of Canadians boycotting U.S. products could become a reality.”

And if that’s a ray of sunshine, that’s the kind of month it was for U.S. manufacturing, which, Fiore said, could be in for a “rough ride” the rest of the year. Companies are hopeful that Wednesday’s announcement will at least offer a roadmap.

“The (level of confusion) in the comments is a pretty dangerous statement when supply people don’t know what to do because they are waiting on the administration,” Fiore said. “They are saying, ‘Just share it with us, and we’ll deal with it.’ The White House sets the pace, and American manufacturing will respond to it. But if you're not setting the pace, companies don’t know what to do, and people are confused.”

The Report On Business® roundup:

Barron’s: Manufacturing Activity Weakens Amid Tariff Concerns. “Overall, it’s a weak report. … Looking ahead, investors want to know how tariffs will impact production, pricing, orders, and overall manufacturing activity. The March report can’t provide answers. Future ISM reports along with comments from U.S. manufacturers will help.”

Bloomberg: U.S. Manufacturing Activity Shrinks for First Time This Year. “The survey indicates sentiment among manufacturers has been shaken by the Trump administration’s uneven rollout of tariffs. On Wednesday, President Donald Trump is expected to announce reciprocal duties on imports as he looks to correct trade imbalances, spark investment in the U.S. and spur domestic output of critical goods and materials.”

Mace News: Manufacturing Slips Back into Contraction in March as Firms Sit on Sidelines, Trim Payrolls Ahead of More Trump Tariffs Expected This Week. “On the question of whether U.S. manufacturers would benefit from the import tariffs and a shift of overseas factories back to domestic locations as administration officials have claimed, Fiore said, ‘I do not see tariffs as being a way to reassure U.S. manufacturing and maintain the same cost structure that we have today,’ he said, pointing out that U.S. firms import various goods produced offshore because it is less expensive to do so.”

Manufacturing Dive: Manufacturing Economy Stalls Amid Tariff Confusion: PMI®. “The president has repeatedly touted tariffs as a way to grow domestic manufacturing, driving more companies to invest in U.S. production as a way to avoid import cost hikes. While this is possible, Fiore said domestic manufacturers are likely to raise their own prices to match the heightened cost environment sparked by tariffs, meaning that even if the U.S. industry grows, it isn’t likely to lead to cheaper consumer goods.”

MarketWatch: Are Manufacturers Falling Back Into a Slump? ISM Says Tariffs Depress Business and Raise Costs. “Companies had been anticipating a business-friendly White House that pursued tax cuts and deregulation. Instead, they face higher short-term costs and possibly the loss of sales if countries retaliate against U.S.-made goods. … The outlook for manufacturers and the broader U.S. economy has gotten more cloudy.”

Reuters: U.S. Manufacturing Slips Back Into Contraction as Tariffs Angst Mounts. “Economists polled by Reuters had forecast the PMI® slipping to 49.5 percent. Manufacturing started turning around at the beginning of the year after a lengthy recession triggered by the Federal Reserve’s aggressive interest rate hikes in 2022 and 2023 to tame inflation. But the nascent recovery appears to have been snuffed out by President Donald Trump’s barrage of tariffs.”

The Wall Street Journal: U.S. Factory Activity Retreated in March on Tariff Concerns. “Price growth accelerated due to tariffs, causing backlogs in new-order placements, supplier-delivery slowdown and manufactured-inventory growth, (Fiore) added. Inventories growth is a temporary move to avoid tariffs and will decline when such trade issues are resolved.”

ISM’s Services PMI® will be unveiled on Thursday, and the Hospital PMI® on Monday. For the most up-to-date content on the reports under the ISM® Report On Business® umbrella, use #ISMPMI on X, formerly known as Twitter.

(Photo credit: Getty Images/SolStock)

About the Author

Dan Zeiger

About the Author

Dan Zeiger is Senior Copy Editor/Writer for Inside Supply Management® magazine, covering topics, trends and issues relating to supply chain management.