Manufacturing Getty Images

US Factory Gains Cool as Raw-Material Inflation Picks Up

The reason the price index went up this month was primarily because of the tariffs,” said Timothy Fiore, chairman of ISM.

U.S. factories expanded at a robust yet slightly slower pace in March and tariffs helped drive a measure of raw-material prices to an almost seven-year high, data from the Institute for Supply Management showed on April 2.

Highlights of ISM Manufacturing (March)

Factory index eased to 59.3 (est. 59.7) from 60.8. The measure of new orders fell to 61.9, the lowest since August, from 64.2  and the Prices-paid index rose for a fourth straight month to 78.1, the highest since April 2011, from 74.2. The employment gauge declined to 57.3 from 59.7

Key Takeaways

A measure of customer inventories dropped to the lowest since July 2011 and a gauge of backlogs held at an almost 14-year high. Together that indicates factories continue to have trouble keeping up with demand from consumers and businesses while paying ever-higher prices for raw materials.

Some of the rising costs were attributed to President Donald Trump’s tariffs on imported steel and aluminum, with one respondent in the machinery sector saying “panic buying” is also resulting in shortages for some customers. Timothy Fiore, chairman of the ISM manufacturing survey committee, said about 32% of comments related to tariff concerns, and businesses began stocking up in response to the tariff announcement.

“The reason the price index went up this month was primarily because of the tariffs,” Fiore said on a call with reporters. Many of the concerns were less about trade wars and more focused on whether the tariffs would limit availability around production schedules, he said.

Even so, the figures are consistent with expectations of further gains in manufacturing production in coming months, and the main index remains near the highest level since 2004. While a measure of factory payrolls softened, the underlying details of the ISM report bode well for employment. The Labor Department’s March jobs report is due later this week.

Other Details

Seventeen of 18 industries reported growth in March, led by fabricated metal products and plastics and rubber products; apparel was the only sector to report a decline.

 The Iidex of backlogs held at 59.8, the highest level since May 2004.

 The measure of production eased to 61 from 62.

The export orders measure fell to 58.7 from 62.8.

 The supplier deliveries gauge cooled to 60.6 from 61.1.

 By Shobhana Chandra

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.