April 1, 2026
The Institute for Supply Management’s index of conditions in the manufacturing sector rose 0.3 in March to 52.7 after having declined 0.2 point in February. The January, February, and March levels are the first time this index has been above the break-even level of 50.0 since February of last year. It also is at its highest level since August 2022, Its sub-50 reading throughout 2025 presumably represented a dip as manufacturers try to figure out how to adjust to the tariffs. A level of 52.7 is associated with a GDP increase of 1.8%. But most of the comments noted below seem to have a cautious tone and not consistent with significant improvement in the manufacturing sector.
The ISM organization does a similar survey for the services sector. The ISM index of conditions in the service sector for March will be released on Monday, April 6.
The Institute for Supply Management Chair for the Survey Committee Susan Spence said, “In March, U.S. manufacturing activity remained in expansion territory, growing at a slightly faster pace than the month before. Of the five subindexes that make up the PMI®, the New Orders Index indicated slower growth compared to 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 U.S. economic policy, despite the recent Supreme Court ruling striking down International Emergency Economic Powers Act (IEEPA) tariffs. In March, 64 percent of comments overall were negative. Among the negative comments, about 20 percent cited tariffs and about 40 percent the war in the Middle East. (Some panelists referenced both topics within a single comment or in mixed sentiment.)”
“Two demand indicators (the New Orders and Backlog of Orders indexes) are in expansion, the New Export Orders Index returned to contraction, and the Customers’ Inventories Index remains in ‘too low’ territory, contracting at a slightly slower rate. A ‘too low’ status for the Customers’ Inventories Index is usually considered positive for future production.”
“Regarding output, the Production Index is in expansion for the fifth month in a row, and the Employment Index decreased by 0.1-percentage point and remains in contraction. Among panelists, 55 percent indicated that managing head counts remains the norm at their companies, as opposed to hiring.”
“Finally, inputs (defined as supplier deliveries, inventories, prices and imports) had mixed results. The Supplier Deliveries Index indicated increasingly slowing deliveries, the Inventories Index contracted at a faster rate, and the Prices Index took another big leap — to 78.3 percent, from 70.5 percent in February. The Imports Index lost 2.3 percentage points for a reading of 52.6 percent, compared to 54.9 percent in February.”
Comments from respondents include the following:
- “This is expected to be a transition year for the U.S. trucking market, with gradual stabilization driven by capacity tightening and replacement demand instead of growth. Demand should stay constrained by weak carrier profitability and high equipment costs but improve modestly late in the year.” [Transportation Equipment]
- “Changes in the tariff structure are bringing cautious opportunities to offset significant costs for the balance of 2026. The actions in Iran, however, add a new wrinkle to energy costs throughout the world, including India. We continue to try and plan for the unpredictable and unexpected.” [Transportation Equipment]
- “We’re seeing steady increases in activity, but geopolitical issues and the Iran war are already waning sentiment.” [Fabricated Metal Products]
- “Customer orders have increased considerably as the construction market remains strong, resulting in higher production volume and increased forecasts to suppliers.” [Machinery]
- “Current Middle East unrest is already starting to impact business operations by increasing lead times, costs, container delays and the like.” [Food, Beverage & Tobacco Products]
- “Lots of relief from Supreme Court striking down (emergency) tariffs, particularly with organic cane sugar from Brazil.” [Food, Beverage & Tobacco Products]
- “Geopolitical tensions related to the conflict in Iran are contributing to rising manufacturing supply costs, and ongoing tariff uncertainty is negatively impacting purchasing strategies and cost forecasts.” [Chemical Products]
- “Ongoing geopolitical instability has emerged as a persistent factor influencing global trade dynamics. We anticipate strategic realignment of supply chains as organizations respond to energy market volatility and shifting trade policies. In light of these macroeconomic headwinds, we — like most organizations — are maintaining a cautious posture regarding investment commitments while continuing to monitor market conditions closely. Our purchasing strategy is being recalibrated to address supply chain vulnerabilities exposed by energy market volatility and evolving trade protectionism.” [Chemical Products]
- “Metal commodity prices continue to put pressure on mechanical commodities. Memory price escalation is causing large cost increases that cannot be mitigated in other areas of the product cost.” [Computer & Electronic Products]
- “The Middle East war has created domestic and global turmoil for the olefins and polyolefins business. Feedstocks and finished product pricing are accelerating dramatically as Middle Eastern and Asian producers suffer from shipping blockages. Global customers for packaging resins are scrambling to cover needs from North America and South America in the face of supply chain complications.” [Plastics & Rubber Products]
The orders component fell 2,3 points in March to 53.5 after having declined 1.3 points in February. Thie January and February levels are the highest since February 2022. “Of the six largest manufacturing industries, four (Computer & Electronic Products; Chemical Products; Machinery; and Transportation Equipment) reported increased new orders. As was the case in January, for every negative panelist comment about new orders, two comments indicated optimism about near-term demand.”
The production component rose 1.6 points in March to 55.1 after having declined 2.4 points in February. “Of the six largest manufacturing industries, four (Transportation Equipment; Computer & Electronic Products; Machinery; and Chemical Products) reported increased production. Panelists had a 2-to-1 ratio of positive to negative comments regarding output,” says Spence.
The delivery performance of suppliers to manufacturing organizations rose 3.8 points in March to 58.9 after having climbed 0.7 points in February. This is the fourth consecutive month this index has been above 50.0. A reading above 50 indicates slower deliveries which presumablly means that the economy in beginning to accelerate. A reading below 50 indicates faster deliveries and is associated with slower growth in the economy. It had been hovering between 50-55 for the past year but appears tp be breaking out to the upside. “Of the six big industries, five (Computer & Electronic Products; Transportation Equipment; Chemical Products; Food, Beverage & Tobacco Products; and Machinery) reported slower supplier deliveries,” says Spence.
The employment index declined 0.1 in March to 48.7 after having risen 0.7 point in February. “The index posted its 30th consecutive month of contraction after expanding in September 2023. Since January 2023, the Employment Index has contracted in 38 of 39 months. Of the six big manufacturing industries, two (Transportation Equipment; and Machinery) reported higher levels of employment in March. For every comment on hiring, there was 1.2 on reducing head counts,” says Spence.
The backlog of orders fell 2.2 points in March to 54.4 after having jumped 5.0 points in February. The February reading was the highest level for the backlog category since May 2022.. Ten industries reporting higher backlogs in March. Six industries reported no change in backlog of orders in March as compared to February. This is a positive sign for factyory output in the months ahead.
Customer inventory levels rose 1.3 points in March to 40.1 after having climbed 0.1 point in February . Customers’ Inventories Index remained in “too low” territory. March’s reading was the third lowest since August 2022.
With a decline in the orders and customer inventories categories slightly higher, the ratio of orders to inventories edged lower in March from 1.4 to 1.3. The 1.3 level for this index suggests that production should climb further in the months ahead.
The prices paid componentclimbed by 7.8 pointws in March to 78.3 after having jumped 11.5 points in February for a total increase of 19.2 points in the past two months. “The Prices Index reading continues to be driven by (1) increases in steel and aluminum prices that impact the entire value chain, (2) tariffs applied to many imported goods and now (3) increases in petroleum-based products as a result of the recent Middle East conflict. Higher prices were reported by 59.4 percent of respondents in March, up 14 percentage points from February’s 45.4 percent and the highest share since June 2022 (65.2 percent),” says Spence.
GDP is expected to climb 2.3% in the first quarter. We are also looking for GDP growth of 2.5% in 2026.
Stephen Slifer
NumberNomics
Charleston, S.C.
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