–ISM’s Spence: New Orders Creeping Back Down Toward Neutral, Widespread Price Hikes ‘Very Concerning’
By Max Sato
(MaceNews) – U.S. manufacturing activity expanded for the third straight month in March, emerging from the tariff-triggered doldrums of 2025, but the outlook has been clouded further by the lingering Mideast conflict, prompting firms to shelve investment and hiring plans and keeping their customers from placing longer-term orders.
The purchasing managers index compiled by the Institute for Supply Management edged up 0.3 percentage point to 52.7 after slipping 0.2 point in February and popping 4.7 points to a 41-month high of 52.6 in January. The slight increase in March was led by higher production and supplier deliveries, but a rise in the latter sub-index means slower deliveries to producers and not an encouraging sign for supply managers.
ISM Manufacturing Business Survey Committee Chair Susan Spence cautioned that the index for new orders, although it is now in expansion for three months, is “creeping back down to (the neutral level of) 50” after soaring to a nearly four-year high of 57.1 in January.
She also told reporters that 17 out of 18 the industries covered by the ISM reported higher costs in March, which is “very, very concerning” and “going in the wrong direction.” She also said the employment index has been “stubbornly stuck in contraction” as firms continue to reduce staff amid uncertainty.
Spence noted that 64% of comments from member firms were negative overall, about 20% of which cited tariffs and about 40% the Mideast war. Some mentioned both issues in a single comment or in mixed sentiment, she added.
The February ISM report didn’t reflect the negative impact of the new tariffs that are replacing those under the International Emergency Economic Powers Act, the use of which by President Donald Trump has been ruled as unlawful by the Supreme Court. The court ruling came just after the ISM had finished gathering information for its February report.
“Current Middle East unrest is already starting to impact business operations by increasing lead times, costs, container delays and the like,” a producer from the food, beverage and tobacco category told the ISM. A chemical producer said, “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.”
“The Middle East war has created domestic and global turmoil for the olefins and polyolefins business,” said a firm in the plastics and rubber products industry. “Feedstocks and finished product pricing are accelerating dramatically as Middle Eastern and Asian producers suffer from shipping blockages,” it said, referring to
Iran’s blockade of the Strait of Hormuz, key to shipping energy and commodities from the Gulf region to the world, particularly to Asia.
Among other sub-indexes:
Customers’ inventories 40.1 (38.8) +1.3; up for the second month in a row after falling 4.6 points in January to the lowest since 35.2 in June 2022.
Prices 78.3 (70.5) +7.8; remains the highest since 78.5 in June 2022.
Background:
Back in June 2022, the prices index eased further to 78.5 from 82.2 in May, 84.6 in April and a peak of 87.1 in March 2022, when it jumped 11.5 points, following Russia’s invasion of Ukraine on Feb. 24 that sparked concerns about energy and commodities supply from the region. The ISM report for June 2022 showed that U.S. manufacturing activity growth slowed that month to the lowest rate in two years with softer new orders and record high lead times needed to deliver goods as companies continued to face labor shortages, supply delays, and high prices.