U.S. Manufacturing Activity Expands Slightly, But Headwinds Loom

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Written by Danny Levin, Deputy Editor for IIR News (Sugar Land, Texas)

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Summary

Economic activity in U.S. manufacturing expanded for the third straight month, according to the ISM's latest PMI survey. However, respondents expressed negative sentiment around the Iran war and ongoing economic uncertainty.

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Purchasing Manager's Index Shows Slight Acceleration in Growth

U.S. manufacturing activity expanded for the third consecutive month in March, according to the Institute of Supply Management's (ISM) Purchasing Managers Index (PMI) survey.

The PMI, which tracks 18 manufacturing sectors in the U.S., registered 52.7% in March--up from 52.4% in February--showing slightly faster growth month-over-month. Any reading over 50% indicates expansion in the manufacturing economy.

Any reading under 50% indicates contraction in the manufacturing economy.

The PMI has five sub-indexes: "The New Orders Index indicated slower growth compared to the previous month, the Production Index grew at a faster rate, and the Employment and Inventories indexes remained in contraction," said Susan Spence, chair of the ISM Manufacturing Business Survey Committee, in the summary of findings.

The final sub-index showed supplier deliveries were slower in March for the fourth consecutive month after one month of faster deliveries.

For new orders, Spence noted there was a one-to-one ratio of positive to negative comments in March, compared with two positive comments for every negative one in February.

"Of the six largest manufacturing industries, four (Transportation Equipment; Computer & Electronic Products; Machinery; and Chemical Products) expanded in March," said Spence.

Tariffs, Iran War Loom Over U.S. Manufacturing

This is the first Manufacturing PMI report with respondents citing the Iran war as a new impact on their business, in addition to "ongoing uncertainty with U.S. economic policy," despite the Supreme Court recently striking down International Emergency Economic Powers Act (IEEPA) tariffs.

For more information, see February 20, 2026, article - Supreme Court Rejects Trump Tariffs under IEEPA.

Tariffs under Section 232 remain in force on a wide range of products, including imported steel and aluminum.

"In March, 64% of comments overall were negative. Among the negative comments, about 20% cited tariffs and about 40% the war in the Middle East. (Some panelists referenced both topics within a single comment or in mixed sentiment.)"

March's Prices Index, an indicator of input and raw materials costs, jumped to its highest reading since June 2022; the reading of 78.3% is up 7.8% month-over-month and 19.3% over the last two months. Raw material prices increased for the 18th consecutive month.

Spence said the index is currently driven by three factors:

• Increases in steel and aluminum prices impacting the entire value chain
• Tariffs applied to many imported goods
• Increases to petroleum-based products as a result of the recent Middle East conflict

Survey respondents echoed that sentiment.

One from Transportation Equipment said, "Changes in the tariff structure are bringing cautious opportunities to offset significant costs for the balance of 2026. The actions in Iran, however, add a new wrinkle to energy costs throughout the world, including India. We continue to try and plan for the unpredictable and unexpected."

Meanwhile, one from Plastics & Rubber Products said, "Feedstocks and finished product pricing are accelerating dramatically as Middle Eastern and Asian producers suffer from shipping blockages."

A respondent from Computer & Electronic Products said, "Metal commodity prices continue to put pressure on mechanical commodities. Memory price escalation is causing large cost increases that cannot be mitigated in other areas of the product cost."

The Middle East conflict is fluid, and war-related impacts could be resolved before the April PMI survey.

On a positive note, one from Machinery said strength in the construction market is causing customer orders to increase significantly, leading to higher production volume and increased forecasts to suppliers.

U.S. Manufacturing Projects Under Construction

Data from Industrial Info's Global Market Intelligence (GMI) Project Database show more than $550 billion worth of Industrial Manufacturing Industry projects are under construction across the U.S., with more than half of the spend attributed to data centers and semiconductor production. Subscribers to the GMI database can view a full list of projects.

Key Takeaways

• The ISM's PMI survey indicates economic activity in U.S. manufacturing expanded for the third straight month.
• However, ongoing U.S. economic uncertainty and the Iran war have impacted manufacturing business operations.
• Indicators for new orders and production expanded, but the former grew at a slower pace month-over-month.
• Increases in steel and aluminum prices, tariffs on imported goods, and the Iran war are raising prices for U.S. manufacturers.

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About IIR News Intelligence
IIR News Intelligence is a trusted source of news for the industrial process and energy markets, powered by Industrial Info Resources' Global Market Intelligence (GMI).

About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).