(Bloomberg) -- A measure of U.S. manufacturing activity lost steam in March, falling to the lowest level since 2020 on slower growth in new orders and production.
The Institute for Supply Management's gauge of factory activity declined to 57.1 from 58.6 in February, according to data released Friday. Readings above 50 indicate expansion. The figure was weaker than most estimates in a Bloomberg survey of economists.
ISM's new orders measure slid nearly 8 points in March to 53.8, and the factory output gauge dropped 4 points to 54.5. The indexes -- now both at their lowest levels since May 2020 -- signal some softening in demand amid mounting price pressures and increased uncertainty.
The group's index of prices paid by producers jumped 11.5 points, the largest monthly advance since the end of 2020, to 87.1. The large increase points to worsening price pressures after Russia's invasion of Ukraine further drove up the prices of petroleum and metals.
Fifteen manufacturing industries reported growth in March, led by apparel, furniture and food.
The report also showed signs capacity constraints may be beginning to moderate. An index of factory employment advanced to a one-year high of 56.3 in March. Order backlogs grew at a softer pace, and a measure of supplier delivery times eased.
“The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment,” Timothy Fiore, chair of ISM's Manufacturing Business Survey Committee, said in a statement. “In March, progress was made to solve the labor shortage problems at all tiers of the supply chain, which will result in improved factory throughput and supplier deliveries.”
Meantime, a gauge of factory inventories climbed to 55.5, suggesting firms are better positioned to meet demand. Customer inventories also improved.
Select ISM Industry Comments
“Customer orders are brisk in the face of significant price increases, while we continue to struggle with inbound supplier service and raw material availability issues.” - Chemical Products
“Overall business conditions are challenging in both domestic and international transportation. The Russian invasion of Ukraine has created uncertainty in the grain markets, causing upward pricing pressure.” - Food & Beverages
“Transportation costs are going up significantly with the increase in fuel prices.” - Machinery
“Demand continues to be strong. Backlog is still increasing — currently at about three months of production. Availability of purchased material continues to constrain production, causing the increased backlog.” - Electrical Equipment & Appliances
“Business continues to be strong, with incoming sales higher but still combating labor and material issues like availability and inflation. “ - Furniture
“Supply chain is still unstable. While we have seen improvements, there are still a lot of issues that have yet to be resolved.” - Primary Metals
The government's monthly jobs report, released earlier Friday, showed manufacturers added 38,000 jobs in March for a second month.
©2022 Bloomberg L.P.
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