US manufacturing continued to expand in March, with significant increases in cost pressures.

The manufacturing sector in the United States continued to expand in March, but internal structural differentiation intensified, while cost pressures significantly increased, indicating that the economy still faces challenges under the influence of geopolitical conflicts and policy uncertainties. According to data released by the Institute for Supply Management (ISM), the U.S. manufacturing PMI recorded 52.7 in March, a slight increase from 52.4 in February, marking the third consecutive month in the expansion zone. This level typically indicates that the overall economy is still on a growth trajectory, and has been in expansion for 17 consecutive months. In terms of sub-indices, the new orders index expanded for the third consecutive month, but the growth rate slowed to 53.5; the production index rose to 55.1, indicating an acceleration in output activity; while the employment index remained at 48.7, continuing to be in the contraction zone, indicating that manufacturing companies are still cautious in terms of employment. Of note is the significant increase in price pressure. The price index jumped to 78.3, the highest level since June 2022, rising by 19.3 percentage points in the past two months. ISM pointed out that this increase was mainly driven by the rise in prices of commodities such as steel, aluminum, tariff factors, and the escalation of energy costs due to conflicts in the Middle East. There are also signs of tension in the supply chain. The supplier deliveries index rose to 58.9, indicating a continued slowing in delivery speed, reflecting increased demand and rising logistical pressures. At the same time, the inventory index dropped to 47.1, with business inventories further shrinking, while customer inventories remain in a "low" state, which is typically seen as a potential support for future production growth. Demand from overseas showed some weakness. The new export orders index fell to 49.9, re-entering the contraction zone, indicating pressure on exports from trade frictions and global uncertainty. At the industry level, 13 manufacturing sub-industries achieved growth in March, including core industries such as transportation equipment, computers and electronics, machinery, and chemicals; while industries such as plastics and rubber products, furniture, and food and beverages experienced contraction. Feedback from businesses showed that the conflict in the Middle East has begun to have a substantive impact on production operations, including transportation delays, cost increases, and supply chain disruptions. At the same time, the uncertainty of tariff policies is also causing disruptions to procurement strategies and cost expectations. About 64% of surveyed companies gave negative comments, with approximately 40 mentioning the situation in the Middle East and 20 mentioning tariff factors. Furthermore, energy and raw material prices have generally risen, with prices of aluminum, copper, steel, natural gas, and plastics among many categories showing upward trends, while some key components and semiconductors are still in a tight supply situation. ISM stated that, in terms of the manufacturing sector's signaling significance for the economy, the current PMI level roughly corresponds to annualized real GDP growth of about 1.8% in the United States. However, with rising cost pressures and increasing demand uncertainty, the sustainability of the manufacturing recovery continues to be put to the test.