As tight supply chains continue to push up corporate input costs, the U.S. ISM manufacturing index for March announced on Friday (1st) unexpectedly fell to 57.1, which was not only worse than market expectations of 59, but also lower than the previous value of 58.6 in February. Reflecting a shift in spending to the services sector amid a slowdown in the pandemic. In addition, the backlog index fell due to the increase in labor recruitment in factories, which pushed up the employment index.
March US ISM manufacturing PMI sub-index:
- The new orders index was at 53.8, the previous value was 61.7
- The production index was reported at 54.5, the previous value was 58.5
- The employment index was reported at 56.3, the previous value was 52.9
- The supplier delivery index was reported at 65.4, the previous value was 66.1
- The inventory index was at 55.5, the previous value was 53.6
- The client inventory index was reported at 34.1, the previous value was 31.8
- The price index reported 87.1, the previous value was 75.6
- The index of outstanding orders reported 60.0, the previous value was 65.0
- The export order index was reported at 53.2, the previous value was 57.1
- The import index of raw materials was reported at 51.8, the previous value was 55.4
Looking at the details of the data, the new orders index fell nearly 8 percentage points to 53.8 in March, and the production index fell to 54.5. Both indices are now at their lowest levels since May 2020, signaling a slowdown in demand amid rising price pressures and heightened uncertainty.
The price index jumped 11.5 percentage points to 87.1 points, the largest monthly gain since December 2020. The sharp rise points to mounting price pressures after Russia’s invasion of Ukraine further pushed up oil and metals prices and could slow global supply chain improvements.
The report also showed signs that capacity constraints are expected to begin to ease. The employment index rose 3.4 percentage points to 56.3, a 1-year high; the growth in the backlog index slowed to 60, and the supplier deliveries index fell to 65.4 from 66.1 in February, although the index remained high.
ISM Chairman Timothy Fiore said U.S. manufacturing remains in a demand-driven, supply-chain-constrained environment. In March, progress was made to address labor shortages at all levels of the supply chain, which will increase throughput from factories and deliveries from suppliers.