Manufacturing Growth Hits 3-Year High as Input Costs Surge

Key Details U.S. manufacturing expanded in March at its strongest pace since 2022, with the ISM manufacturing index reaching 52.7. However, the expansion came with a significant caveat: input prices climbed 7.8 points to 78.3, marking the highest level since mid-2022. Over the past two months alone, the price index jumped 19.3 points, the largest two-month surge in nearly a decade. Why It Matters The price spike reflects ongoing disruptions from the Iran conflict and closure of the Strait of Hormuz. This critical shipping route handles not just oil, but aluminum, fertilizer, and helium used in semiconductor production. Higher input costs are likely to pressure manufacturers to raise prices, potentially fueling inflation throughout 2026. Mixed Signals on Growth While 13 manufacturing sectors reported growth including primary metals and transportation equipment, the data shows cracks. New orders and backlogs growth slowed, and exports contracted. The supplier deliveries index hit its highest point since May 2022, indicating supply chain strain. Factory employment remained essentially flat, with head count continuing to shrink despite wages holding near 12-month highs. Driver Impact Negative sentiment dominated manufacturer feedback, with 64% citing concerns in March. About 40% of complaints referenced Middle East tensions, while 20% blamed tariffs. Expect potential freight demand fluctuations as manufacturers navigate higher costs and uncertain supply chains.