U.S. Manufacturing Hits Four-Year High as Cost Pressures Surge
Expansion spreads globally, but inflationary pressure and geopolitical risk keep the recovery uneven.
U.S. manufacturing activity expanded at its fastest pace in nearly four years in March, with the ISM Manufacturing PMI rising to 52.7 percent. That figure represented the highest reading since August 2022 and a modest increase from February’s 52.4 percent. Gains were broad-based, with production, new orders and supplier deliveries all advancing, even as employment remained in contraction and export demand softened.
While the PMI points to strengthening manufacturing activity, the underlying picture is more complex. Input costs surged to their highest level since June 2022, creating a split environment for brush manufacturers — improving demand alongside intensifying cost pressure.
EXPANSION BROADENS, BUT MOMENTUM IS MIXED
The PMI’s rise to 52.7 percent reflects continued expansion rather than a one-month rebound. Production accelerated to 55.1 percent, while new orders remained in expansion territory at 53.5 percent, though at a slower pace than in February. Backlogs also remained in growth at 54.4 percent, signaling that manufacturers are still working through accumulated demand, even as the rate of expansion moderated.
Customer inventories remained in “too low” territory at 40.1 percent, a forward-looking indicator that typically supports continued production in the near term.
At the same time, employment remained in contraction at 48.7 percent, with a majority of firms indicating that managing headcount continues to be the prevailing strategy. This reflects ongoing caution around demand durability, cost pressures and broader economic uncertainty.
PRICES SURGE TO NEAR FOUR-YEAR HIGH
The Prices Index jumped to 78.3 percent in March, up sharply from 70.5 percent in February and reaching its highest level since June 2022. Over the past two months alone, the index has risen more than 19 percentage points, underscoring the speed and breadth of cost escalation.
Tariffs remain a central factor, alongside higher metals pricing and energy-related impacts tied to escalating Middle East conflict. ISM respondents also pointed to growing uncertainty around trade policy and supply chain realignment as contributing pressures.
Notably, no commodities were reported down in price for the month, highlighting the broad-based nature of inflation across manufacturing inputs.
SUPPLY CHAINS SLOW AS DEMAND AND DISRUPTION COLLIDE
The Supplier Deliveries Index rose to 58.9 percent, indicating slower delivery times and marking the fourth consecutive month of deceleration. In the ISM methodology, slower deliveries can reflect both stronger demand and supply chain constraints.
In March, both dynamics were at play. Panelists cited increased demand alongside emerging logistical challenges tied to the Middle East conflict, particularly in global shipping lanes. These factors are contributing to longer lead times and increased uncertainty for manufacturers managing inbound supply.
For brush manufacturers sourcing internationally, the data reinforces the importance of supplier diversification and strategic inventory positioning.
EXPORT DEMAND SLIPS BACK INTO CONTRACTION
The New Export Orders Index fell to 49.9 percent in March, returning to contraction territory after briefly expanding in February. While only marginally below 50, the shift signals softer international demand amid rising geopolitical tension and trade uncertainty.
This trend suggests that U.S. manufacturers may face increased difficulty relying on export markets to offset rising domestic cost pressures in the near term.
COMMODITIES
Up in Price: Aluminum; Chemical Products; Cooking Fats; Copper; Copper Based Products; Corn; Diesel Fuel; Electronic Components; Freight; Fuel; Memory Components; Methanol; Natural Gas; Plastics; Polypropylene; Precious Metals; Resins; Soybean Products; Steel; Steel — Hot Rolled; Steel — Stainless; Steel Products; Titanium Dioxide; and Tungsten Products.
Down in Price: None.
In Short Supply: Bearing Components; Electrical Components; Electronic Components; Memory; Rare Earth Components; and Semiconductors.
US SECTOR REPORT
ISM GROWTH SECTORS (13): Apparel, Leather and Allied Products; Textile Mills; Paper Products; Printing and Related Support Activities; Chemical Products; Plastics and Rubber Products; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; Machinery; Computer and Electronic Products; Electrical Equipment, Appliances and Components; and Transportation Equipment.
ISM CONTRACTION SECTORS (3): Wood Products; Food, Beverage and Tobacco Products; and Miscellaneous Manufacturing.
MARCH ISM REPORT COMMENTS
(U.S. Manufacturers)
Transportation Equipment: “Changes in the tariff structure are bringing cautious opportunities to offset significant costs for the balance of 2026. 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.”
Fabricated Metal Products: “We’re seeing steady increases in activity, but geopolitical issues and the Iran war are already waning sentiment.”
Machinery: “Customer orders have increased considerably as the construction market remains strong, resulting in higher production volume and increased forecasts to suppliers.”
Food, Beverage and Tobacco Products: “Current Middle East unrest is already starting to impact business operations by increasing lead times, costs, container delays and the like.”
Plastics and Rubber Products: “The Middle East war has created domestic and global turmoil for the olefins and polyolefins business. Feedstocks and finished product pricing are accelerating dramatically as Middle Eastern and Asian producers suffer from shipping blockages. Global customers for packaging resins are scrambling to cover needs from North America and South America in the face of supply chain complications.”
Chemical Products: “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.”
Food, Beverage and Tobacco Products: “Lots of relief from Supreme Court striking down (emergency) tariffs, particularly with organic cane sugar from Brazil.”
Chemical Products: “Ongoing geopolitical instability has emerged as a persistent factor influencing global trade dynamics. We anticipate strategic realignment of supply chains as organizations respond to energy market volatility and shifting trade policies. In light of these macroeconomic headwinds, we — like most organizations — are maintaining a cautious posture regarding investment commitments while continuing to monitor market conditions closely. Our purchasing strategy is being recalibrated to address supply chain vulnerabilities exposed by energy market volatility and evolving trade protectionism.”
Computer and Electronic Products: “Metal commodity prices continue to put pressure on mechanical commodities. Memory price escalation is causing large cost increases that cannot be mitigated in other areas of the product cost.”
Transportation Equipment: “This is expected to be a transition year for the U.S. trucking market, with gradual stabilization driven by capacity tightening and replacement demand instead of growth. Demand should stay constrained by weak carrier profitability and high equipment costs but improve modestly late in the year.”
GLOBAL PMI NOTES
EURO AREA: Eurozone manufacturing expanded at its fastest pace since mid-2022 in March, with the PMI rising to 51.6 as output strengthened and backlogs signaled emerging capacity pressures. However, supply disruptions tied to the Middle East conflict drove up input costs sharply, while employment declined and business confidence softened.
CANADA: Canada’s manufacturing sector stalled in March, with the PMI slipping to 50.0 as output contracted and new orders weakened under tariff pressures and high costs. Firms reduced staffing and faced rising input prices, while confidence fell amid geopolitical uncertainty and trade tensions.
CHINA: China’s manufacturing expansion slowed in March, with the PMI easing to 50.8 as output and new orders grew at a reduced pace. Rising costs and supply delays intensified pressures, but firms remained optimistic, supported by demand, investment, and policy support.
FRANCE: France’s manufacturing sector was broadly flat in March, with the PMI at 50.0 as output declined and new orders fell at the fastest pace in five months. Rising input costs and supply disruptions added pressure, while confidence weakened amid ongoing uncertainty.
GERMANY: Germany’s manufacturing sector strengthened in March, with the PMI rising to 52.2—its strongest growth in nearly three years—driven by gains in output and new orders. However, supply chain disruptions and surging input costs weighed on sentiment, pushing business confidence down to a four-month low.
INDIA: India’s manufacturing growth slowed to a near four-year low in March, with the PMI at 53.9 as output and orders expanded more modestly. Despite rising cost pressures, firms increased hiring and maintained optimism, supported by stronger export demand and continued investment.
ITALY: Italy’s manufacturing sector posted its strongest performance in over three years in March, with the PMI rising to 51.3 as output, orders, and employment improved. However, supply chain delays and rising costs tied to geopolitical tensions continued to challenge operations, even as confidence remained positive.
MEXICO: Mexico’s manufacturing contraction eased in March, with the PMI rising to 48.9 as declines in output and new orders moderated. Cost pressures intensified and employment fell, while ongoing tariffs and supply disruptions continued to weigh on demand and operations.
UNITED KINGDOM: UK manufacturing growth remained positive in March, with the PMI at 51.0, though output declined for the first time in six months amid rising uncertainty. Input costs surged due to higher energy prices, prompting firms to raise selling prices while confidence weakened.
Source: Institute for Supply Management®, PMI® (Purchasing Manager Index), Report On Business®. For more information, visit the ISM® website at www.ismworld.org.
