US March Manufacturing PMI Contracts, Factory Output Prices Surge…Inflation Predicted

Manufacturing PMI Falls from 50.3 in February to 49.0 in March

Input Prices Rise to Highest Level in Three Years

Amid growing concerns over tariffs, the US Manufacturing Purchasing Managers' Index (PMI) recorded 49.0 in March, falling to a contraction level. Inflation in factory output prices soared to the highest level in nearly three years.

On the 1st (local time), the Institute for Supply Management (ISM) announced that the US March Manufacturing PMI fell to 49.0 from 50.3 in February. This is lower than the economists' forecast of 49.5. A PMI below 50 indicates a contraction in the manufacturing sector, which accounts for 10.2% of the US economy.

The forward-looking new orders sub-index of the ISM survey fell to 45.2, the lowest since May 2023, from 48.6 in February. Factory production decreased. The measure of prices paid by US manufacturers for inputs jumped to 69.4, the highest level since June 2022, from 62.4 in February. This suggests that increases in factory output prices and commodity prices could lead to higher consumer prices.

Manufacturing showed signs of recovery from the latter half of last year after a prolonged slump due to the Federal Reserve's interest rate hikes to curb inflation in 2022 and 2023, but fell back into a slump due to the tariff barrage of the Trump administration.

Trump claims to revive US manufacturing through tariffs, but economists criticize that import tariffs cause inflation and harm the economy. The sentiment of US businesses and consumers is already plummeting.

Economists at Goldman Sachs forecast that the likelihood of a recession within the next 12 months has increased from 20% to 35%. Economists also warn that US manufacturers' heavy reliance on imported raw materials could severely disrupt supply chains.

Guest Reporter Kim Jung-ah kja@hankyung.com