The Institute for Supply Management released its monthly manufacturing Purchasing Managers Index (PMI) on April 1, reflecting March activity, which revealed an overall month-to-month decline, driven by demand and production retreat.

The PMI — regarded as an indicator of overall U.S. industrial economic health — was down 1.3-percentage-points from February to a reading of 49%. February was the PMI’s second reading in expansion territory (50.0% or above), but was down from January’s 1.7-point increase.

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Economists surveyed by Reuters had predicted the PMI would decline to 49.5% in March.

More granularly, the latest report showed that demand weakened with new orders contracting for the second month in a row, while production declined drastically from February (moving into contraction territory) and inputs expanded.

Here is how the overall Manufacturing PMI has looked in bar chart form since the start of 2024:

Source: tradingeconomics.com

Of the March PMI’s factoring indexed, six ended the month in contraction territory. The figure was driven by declines of 3.4 in new orders and 2.9 in employment, offset by increases of 7.0 in prices, 3.5 in inventories and 1.5 in customers’ inventories.

“Demand and production retreated and destaffing continued, as panelists’ companies responded to demand confusion,” ISM Manufacturing Business Survey Committee Chairman Timothy Fiore said in the institute’s April report. “Prices growth accelerated due to tariffs, causing new order placement backlogs, supplier delivery slowdowns and manufacturing inventory growth.”

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Fiore added that 46% of manufacturing GDP contracted in March, up from 24% in February. The share of sector GDP registering a composite PMI calculation at or below 45% — considered a good barometer of overall manufacturing weakness — was 7% in March, a 5-point improvement compared February’s 2%.

The nine manufacturing industries reporting growth in March were: Textile Mills; Petroleum & Coal Products; Fabricated Metal Products; Primary Metals; Computer & Electronic Products; Nonmetallic Mineral Products; Transportation Equipment; Electrical Equipment, Appliances & Components; and Miscellaneous Manufacturing.

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The seven industries reporting contraction in March were: Wood Products; Paper Products; Plastics & Rubber Products; Furniture & Related Products; Chemical Products; Food, Beverage & Tobacco Products; and Machinery.