US manufacturing activity shrinks for first time this year

The survey indicates sentiment among manufacturers has been shaken by the Trump administration’s uneven rollout of tariffs. On Wednesday, President Donald Trump is expected to announce reciprocal duties on imports as he looks to correct trade imbalances, spark investment in the US and spur domestic output of critical goods and materials.

Seven industries contracted in March, led by wood products, paper, plastics and rubber, and furniture. Nine industries reported growth, including textiles, petroleum and coal, and fabricated metals.

“Demand and production retreated and destaffing continued, as panelists’ companies responded to demand confusion,” Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said in a statement.

Separate data out Tuesday from the Labor Department showed fewer job openings in February, including a decline at manufacturers.

Some companies are pausing investment plans due to the uncertainty surrounding the details of the implementation of additional tariffs. Meanwhile, a rush by firms to import ahead of the hikes boosted the ISM index of factory inventories to 53.4, the highest since October 2022, helping underpin the overall gauge.

Select ISM Industry Comments

“Complex markets saw a surge in volume buying in anticipation of 2025 being slightly better than 2024. In March, however, all markets saw a slowdown, with fear and inventory stocking to hold through a potential crisis.” — Chemical Products

“Acute shortages continue to impact supply chain continuity. Chinese restrictions on critical minerals such as germanium have caused major shortages, resulting in all supply needed in 2025 already assumed — and, not surprisingly, significant price increases as a result. Tariffs are causing minor ripples at the moment in securing supply, with purchase order terms narrowing due to uncertainties.” — Transportation Equipment

“Customers are pulling in orders due to anxiety about continued tariffs and pricing pressures.” — Computer & Electronic Products

“Business condition is deteriorating at a fast pace. Tariffs and economic uncertainty are making the current business environment challenging.” — Machinery

“New order levels have increased and are better than expected. We suspect that our customers are trying to build inventory at current prices to get ahead of expected tariff and related cost increases. We expect this surge in demand to be short-lived.” — Fabricated Metals

“No evidence of growing demand. Tariff impacts and mitigation strategies are a daily conversation.” — Electrical Equipment, Appliances & Components

“Worldwide economic instability has really begun to impact our oil and gas business.” — Petroleum & Coal Products

“Bearish market sentiment and tariff applications and costs have dominated discussions over the past month and should continue to dominate markets until a clear path forward is determined. Overall concern is whether or not demand destruction will occur with higher pricing.” — Primary Metals

The scramble to secure goods and materials from outside the country also helped drive materials prices higher. With consumer demand cooling so far this year, producers may find it difficult to pass on higher costs.

Meanwhile, the imports gauge declined 2.5 points to 50.1, indicating producer demand for foreign goods has leveled off.