U.S. manufacturing expands in March as cost pressures persist, ISM reports

Washington, DC — U.S. manufacturing activity grew in March for a second straight month, though rising costs and uneven demand continued to challenge the sector, according to data released Wednesday by the Institute for Supply Management.

The ISM manufacturing index registered 52.7 in March, up from 52.4 in February. A reading above 50 indicates expansion in the manufacturing sector.

The increase signals continued recovery after a prolonged period of contraction in 2023, with several key industries reporting improved production levels and steadier demand.

Still, the report showed signs of underlying weakness. The new orders index edged lower to 53.5, suggesting demand growth remained modest. Order backlogs also declined, indicating limited momentum in future production.

At the same time, cost pressures intensified. The prices paid index rose sharply to 78.3, its highest level in more than a year, reflecting higher raw material and energy costs.

Supplier delivery times lengthened in March, with that index climbing to 58.9. Slower deliveries can indicate stronger demand but also point to ongoing supply chain inefficiencies.

Employment in the manufacturing sector continued to contract, as companies remained cautious about hiring despite improving output.

The ISM report reflects a sector that is expanding but still navigating headwinds, including elevated input costs, supply chain challenges and uncertainty around future demand.

Economists say the mixed data could complicate the outlook for interest rates, as persistent inflation pressures in manufacturing may influence broader price trends across the economy.