Today’s US data are in general softer than hoped. The ISM manufacturing index for March dropped to 49.0 from 50.3, lower than the 49.5 consensus and back in contraction territory. This is broadly in line with regional manufacturing indicators released in recent days. The details show big drops in employment (44.7 from 47.6) and new orders (45.2 from 48.6) with production down at 48.3 versus 50.7. Remember 50 is the break-even level so anything above is expansion and the further below 50 the deeper the downturn.
This suggests that tariff fears (impact on supply chains and potential reciprocal action from foreign trading partners) are hurting the sector right now. Note too the big rise in prices paid to 69.4 from 62.4, which suggests pre-emptive moves ahead of the imposition of tariffs with the threat of higher prices for consumers looking very real. Below is a chart of manufacturing production growth (YoY%) versus the ISM production index. This underscores how the stagnation in the sector over recent years looks set to continue despite tariffs supposedly being a tool to reinvigorate manufacturing.
