The ISM purchasing managers' index dropped to 49 last month from 50.3 in February. A reading below 50 indicates the manufacturing sector is generally contracting. The consensus was for a 49.5 print in a survey compiled by Bloomberg.
"Demand and production retreated and destaffing continued, as panelists' companies responded to demand confusion," said Timothy Fiore, chair of the ISM's manufacturing business survey committee. "Prices growth accelerated due to tariffs, causing new order placement backlogs, supplier delivery slowdowns and manufacturing inventory growth."
President Donald Trump is set to announce "country-based" tariffs during an event in the Rose Garden on Wednesday, according to media reports quoting White House Press Secretary Karoline Leavitt as saying on Monday.
The index gauging new orders dipped to 45.2 in March from 48.6 the month prior, contracting for a second straight month. Production turned negative at 48.3, after two months of expansion. The employment index moved down 2.9 points sequentially to 44.7 last month, while the prices index accelerated to 69.4 from 62.4, according to the survey.
Separately, S&P Global said its manufacturing PMI dropped to 50.2 last month from February's 52.7, a reading that indicates "a marginal improvement in operating conditions that was the weakest of the year so far." The consensus among analysts was for a 49.9 reading in a Bloomberg poll.
Employment numbers were steady following four months of gains as "softer trends in output and new orders, plus uncertainty in the outlook, weighed on hiring decisions," the data provider said.
"A key concern among manufacturers is the degree to which heightened uncertainty resulting from government policy changes, notably in relation to tariffs, causes customers to cancel or delay spending, and the extent to which costs are rising and supply chains deteriorating in this environment," said Chris Williamson, chief business economist at S&P Global Market Intelligence.
Input price inflation hit its highest level since August 2022, partly due to tariffs, S&P Global said.
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