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Manufacturing Expands Most Since 2022
Input Costs Jump Amid Iran War
U.S. manufacturing activity expanded in March by the most since 2022, while input prices continued to surge amid the war with Iran.
The Institute for Supply Management’s gauge of prices paid for manufacturing inputs climbed another 7.8 points to 78.3, remaining at the highest since mid-2022. Over the past two months, the index has advanced 19.3 points, the most in nearly a decade.
The Strait of Hormuz has effectively been closed due to the war with Iran, preventing the transportation of oil and other products critical to manufacturing. That has fueled a surge in oil prices.
Still, ISM’s measure of factory activity edged up to 52.7, boosted by firmer production growth and flattered by an increase in a gauge of supplier deliveries. The pickup in prices paid and longer lead times likely reflect the impact of trade disruptions related to the conflict.
“In March, 64% of comments overall were negative,” Susan Spence, chair of the ISM Manufacturing Business Survey Committee, said in a statement. “Among the negative comments, about 20% cited tariffs and about 40% the war in the Middle East.”
Thirteen manufacturing industries reported growth last month, including primary metals and transportation equipment, while three noted contraction.
.® Manufacturing PMI® Report: New orders and backlogs growth slowed as exports contracted, but production strength helped boost factories in March. The ticked up to 52.7%, despite headaches from and the Middle East conflict. — Institute for Supply Management (@ism)
The supplier deliveries index rose to the highest since May 2022. Beyond energy, the Strait of Hormuz is a chokepoint for products including aluminum, fertilizer, and even helium, which is used in the production of semiconductors.
Higher input costs may put pressure on U.S. manufacturers to raise prices, suggesting that overall inflation will run hotter through the year. Economists in a recent Bloomberg survey revised up their forecasts for inflation.
The ISM report also showed new orders and backlogs grew at a solid, yet slower pace in March.
Meanwhile, the group’s factory employment index was little changed. While it remains near the highest level in over a year, the measure signaled factory head count continued to shrink in March. The Bureau of Labor Statistics will release the March jobs report on April 3.
