Source: Economics Group of Wells Fargo Bank, N.A.
Summary
The ISM manufacturing index slipped back into contraction as manufacturers come to grips with tariff policy. A front-running of tariffs and shift to minimize import exposure is driving up prices, while persistent uncertainty is crimping underlying demand and leaves manufacturers longing for clarity.
It May Be April 1, but Tariffs Are No Joke for Manufacturers
Tariff-related uncertainty was seen throughout the March ISM release. The overall index came in at 49.0, indicating manufacturing activity contracted again after expanding the prior two months (chart). Out of the five components that feed directly into the headline metric, manufacturing inventories was the only one to expand last month, as a pull forward in demand ahead has led to stockpiling of inputs among manufacturers. The inventory component hit 53.4, which is the highest level since late 2022, when the economy was dealing with pandemic-related supply snarls.