US manufacturing activity slipped into contraction in March for the first time this year, as the ISM manufacturing index dropped to 49 from 50.3. (Readings below 50 signal contraction.)
At the same time, prices paid for materials jumped 7 points to 69.4 — the highest level since June 2022 — representing a sharp 14.5-point rise over the past two months. That surge in input costs is putting additional pressure on factory margins and supply chains.
The pullback in manufacturing appears linked to uncertainty over the Trump administration’s tariff policies. Factory orders fell to their weakest level since May 2023, production declined, and employment contracted at the fastest pace since September. Facing policy uncertainty, many manufacturers have paused or delayed investment plans, weighing the risks of higher tariffs and potential disruptions to trade and sourcing.
Overall, the combination of higher material costs and policy-driven uncertainty is creating a challenging environment for US factories. If these trends persist, continued pressure on output, hiring and capital spending could slow the broader economic recovery in coming months.