US manufacturing activity shrinks for first time in 2025 as tariffs weigh on demand, hiring
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The scramble to secure goods and materials from outside the US drove factory prices higher.
PHOTO: REUTERS
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Washington – US factory activity contracted in March for the first time in 2025 and prices accelerated sharply for a second month as the drumbeat of higher tariffs
The Institute for Supply Management’s (ISM) manufacturing index declined 1.3 points in March to 49, according to data released on April 1. Readings below 50 indicate contraction, and the figure was slightly weaker than the median production in a Bloomberg survey of economists.
The group’s price measure increased to the highest since June 2022. Over the past two months, the gauge has increased 14.5 points, the most over a comparable period in four years.
The ISM index of factory orders slumped to the lowest level since May 2023. Along with a bigger contraction in order backlogs, the drop in bookings caused production to shrink for the first time in 2025. Factory employment contracted at the fastest pace since September 2024.
The survey indicates sentiment among manufacturers has been shaken by the Trump administration’s uneven roll-out of tariffs.
On April 2, US President Donald Trump is expected to announce global reciprocal duties on imports as he looks to correct trade imbalances, spark investment in the US and spur domestic output of critical goods and materials.
Seven industries contracted in March, led by wood products, paper, plastics and rubber, and furniture.
Nine industries reported growth, including textiles, petroleum and coal, and fabricated metals.
Mr Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, in a statement said: “Demand and production retreated and destaffing continued, as panellists’ companies responded to demand confusion.”
Separate data out on April 1 from the US Labour Department showed fewer job openings in February, including a decline at manufacturers.
Some companies are pausing investment plans due to uncertainty over the details of the implementation of additional tariffs.
Meanwhile, a rush by firms to import ahead of the hikes boosted the ISM index of factory inventories to 53.4, the highest since October 2022, helping underpin the overall gauge.
The scramble to secure goods and materials from outside the country also helped drive materials prices higher. With consumer demand cooling so far in 2025, producers may find it difficult to pass on higher costs.
Meanwhile, the imports gauge declined 2.5 points to 50.1, indicating producer demand for foreign goods has levelled off. BLOOMBERG
