Manufacturing output posted its third consecutive month of growth in March, according to the new edition of the Manufacturing Report on Business, which was issued today by the Institute for Supply Management (ISM).
The report’s benchmark reading, the PMI, came in at 52.7, (a reading higher than 50 indicates growth), up 0.3% compared to February’s 52.4 reading, and 0.1% above January’s 52.6 reading, which marked a 4.7% gain over December, and represented the first positive PMI reading since a 50.0 reading in February 2025, with the PMI growing, at a faster pace, for the third consecutive month, and the overall economy growing, at a faster rate, for the 17th consecutive month.
The March PMI was 3.1% above the 12-month average of 49.6, with March’s 52.7 and December’s 47.9 marking the respective high and lows for that period.
ISM reported that 13 manufacturing sectors— 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 seeing contraction were: Plastics & Rubber Products; Furniture & Related Products; and Food, Beverage & Tobacco Products.
ISM cited the following for the report’s key metrics in March:
- New Orders, at 53.5 fell 2.3%, to 55.8, growing, at a slower pace, for the third consecutive month, following February’s 55.8 and January’s 57.1, its highest reading since a February 2022 59.7 reading (prior to January the metric had not seen consistent growth since a 24-month stretch of growth ended in May 2022), with 11 sectors reporting growth in March;
- Production, at 55.1, increased 1.6% over February’s 53.5, trailing January’s 55.9 reading, its highest reading since February 2022’s 58.1, growing, at a faster rate, for the fifth consecutive month, with 10 sectors reporting growth;
- Employment, at 48.7, fell 0.1%, contracting, at a faster rate, for the 30th consecutive month, and down in 38 of the last 39 months, with 18 sectors reporting growth;
- Supplier Deliveries, at 58.9 (a reading over 50 indicates slower deliveries), were up 3.8% compared to February, slowing, at a faster rate, for the fourth consecutive month, with 13 sectors reporting slower deliveries;
- Inventories, at 47.1, fell 1.7%, contracting, at a faster rate, for the 11th consecutive month with four sectors reporting higher inventories;
- Customers’ Inventories, at 40.1, were up 1.3%, coming in too low, at a slower rate, for the 18th consecutive month; and
- Prices, at 78.3, were up 7.8%, increasing, at a faster rate, for the 18th consecutive month, with 17 sectors reporting higher prices, hitting its highest reading since June 2022’s 78.5 reading
Economic conditions, tariffs, and the ongoing Iran conflict were among the main themes cited in ISM panelists’ comments.
“Changes in the tariff structure are bringing cautious opportunities to offset significant costs for the balance of 2026,” observed a Transportation Equipment panelist. “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.”
And a Chemical Products panelist noted that 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.
In an interview with LM, Susan Spence, Chair of the ISM’s Manufacturing Business Survey Committee, explained that while manufacturing is growing, with the PMI up for three months and Production up for five months, the outlook remains muddled.
“The situation in the Middle East feels like it is particularly hurtful, because it is on top of other chaos,” she said. “That was made clear in the panelists’ comments, too, pointing to things like how geopolitical instability has emerged as a persistent factor influencing global trade dynamics.”
Spence also added that the current tariff outlook—with the Supreme Court ruling in February that the White House’s IEEPA tariffs were illegal, coupled with the current 10% Section 122 tariffs intact through late July and ongoing Section 301 investigations—puts manufacturers in a tough spot, in that shifting trade policies make it difficult for companies to plan and make capital investments.
That also holds true on the pricing side, as evidenced by March’s 7.8% increase, following February’s 11% gain.
In the report, Spence said that 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.
Addressing New Orders, which are considered the engine moving manufacturing, Spence said that while March was up again, it has seen sequential declines going back to the beginning of 2026.
“It’s still growing, but the growth is slowing down, and some of the other readings—like Production and Backlog of Orders have the same kind of trajectory,” she said. “With Production going up again, without the New Orders staying at least the same or a little better, I think we’re going to see, like we did last August in a couple of months, if Production starts waning off as they send the goods through the line. And if the pipeline isn’t filling at the same rate, then that’s going to dip and could dip the PMI back down, unless orders are forthcoming.”
