U.S. Manufacturing PMI® at 46.3%

March 2023 Manufacturing ISM® Report On Business®

  • New Orders and Production Contracting
  • Backlogs Contracting
  • Supplier Deliveries Faster
  • Raw Materials Inventories Contracting; Customers’ Inventories Too Low
  • Prices Decreasing; Exports and Imports Contracting

(Tempe, Arizona) — Economic activity in the manufacturing sector contracted in March for the fifth consecutive month following a 28-month period of growth, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee:

“The March Manufacturing PMI® registered 46.3 percent, 1.4 percentage points lower than the 47.7 percent recorded in February. Regarding the overall economy, this figure indicates a fourth month of contraction after a 30-month period of expansion. The Manufacturing PMI® is at its lowest level since May 2020, when it registered 43.5 percent. The New Orders Index remained in contraction territory at 44.3 percent, 2.7 percentage points lower than the figure of 47 percent recorded in February. The Production Index reading of 47.8 percent is a 0.5-percentage point increase compared to February’s figure of 47.3 percent. The Prices Index registered 49.2 percent, down 2.1 percentage points compared to the February figure of 51.3 percent. The Backlog of Orders Index registered 43.9 percent, 1.2 percentage points lower than the February reading of 45.1 percent. The Employment Index continued in contraction territory, registering 46.9 percent, down 2.2 percentage points from February’s reading of 49.1 percent. The Supplier Deliveries Index figure of 44.8 percent is 0.4 percentage point lower than the 45.2 percent recorded in February; this is the index’s lowest reading since March 2009 (43.2 percent). The Inventories Index dropped into contraction at 47.5 percent, 2.6 percentage points lower than the February reading of 50.1 percent. The New Export Orders Index reading of 47.6 percent is 2.3 percentage points lower than February’s figure of 49.9 percent. The Imports Index continued in contraction territory at 47.9 percent, 2 percentage points below the 49.9 percent reported in February.”

Fiore continues, “The U.S. manufacturing sector contracted again, with the Manufacturing PMI® declining compared to the previous month. With Business Survey Committee panelists reporting softening new order rates over the previous 10 months, the March composite index reading reflects companies continuing to slow outputs to better match demand for the first half of 2023 and prepare for growth in the late summer/early fall period. Demand eased, with the (1) New Orders Index contracting at a faster rate, (2) New Export Orders Index still below 50 percent and declining, (3) Customers’ Inventories Index entering the high end of a ‘just right’ level, a negative for future production and (4) Backlog of Orders Index sagging again and continuing in contraction. Output/Consumption (measured by the Production and Employment indexes) was negative, with a combined 1.7-percentage point downward impact on the Manufacturing PMI® calculation. The Employment Index continued in contraction after two months of marginal expansion, and the Production Index logged a fourth month in contraction territory, though at a slightly lower rate. Panelists’ comments now indicate equal levels of activity toward expanding and contracting head counts at their companies, amid mixed sentiment about the return of growth early in the second half of the year. Inputs — defined as supplier deliveries, inventories, prices and imports — continue to accommodate future demand growth. The Supplier Deliveries Index indicated faster deliveries, and the Inventories Index dropped back into contraction as panelists’ companies continue to manage their total supply chain inventories and liquidity. The Prices Index dropped back into ‘decreasing’ territory after one month of increasing prices preceded by four straight months below 50 percent.

“Of the six biggest manufacturing industries, two — Petroleum & Coal Products; and Machinery — registered growth in March.

“New order rates remain sluggish as panelists become more concerned about when manufacturing growth will resume. Supply chains are now ready for growth, as panelists’ comments support reduced lead times for their more important purchases. Price instability remains, but future demand is uncertain as companies continue to work down overdue deliveries and backlogs. Seventy percent of manufacturing gross domestic product (GDP) is contracting, down from 82 percent in February. However, more industries contracted strongly; the proportion of manufacturing GDP with a composite PMI® calculation at or below 45 percent — a good barometer of overall manufacturing sluggishness — was 25 percent in March, compared to 10 percent in February, 26 percent in January and 35 percent in December 2022,” says Fiore.

The six manufacturing industries that reported growth in March — in the following order — are: Printing & Related Support Activities; Miscellaneous Manufacturing; Fabricated Metal Products; Petroleum & Coal Products; Primary Metals; and Machinery. The 12 industries reporting contraction in March, in the following order, are: Furniture & Related Products; Nonmetallic Mineral Products; Textile Mills; Plastics & Rubber Products; Paper Products; Wood Products; Food, Beverage & Tobacco Products; Apparel, Leather & Allied Products; Chemical Products; Computer & Electronic Products; Electrical Equipment, Appliances & Components; and Transportation Equipment.


  • “Orders and production are fairly flat month over month. Lead times have stabilized in most areas, so looking at reducing commitments on new orders, except for a few strategic electronic buys with lead times that are still too long.” [Computer & Electronic Products]
  • “Sales a bit down, and budgets being cut with a greater emphasis on savings.” [Chemical Products]
  • “Sales are slowing at an increasing rate, which is allowing us to burn through back orders at a faster-than-expected pace.” [Transportation Equipment]
  • “Lead times are still improving, but prices continue to face inflationary pressures. Prices of steel and steel products are going up some. Hydraulic components are still facing extended lead times. We are increasing inventory levels of imports due to global uncertainty from the ongoing war in Ukraine and threats from China.” [Machinery]
  • “Overall, (our) first quarter is going better than planned, with sales increases of about 7 percent versus a budget of 4.5 percent. However, sales volume is pulling down our automotive original equipment manufacturer (OEM) side, which is the majority of our business. We believe the second quarter will be hard but are holding to our outlook.” [Fabricated Metal Products]
  • “Overall, things feel more stable in the first quarter 2023 than they did throughout 2021-22. Customer demand is — as expected — growing well, and the overall supply environment is far better than the previous two years. This is not to say there are not challenges; there absolutely are. However, there are fewer issues cropping up each week, and supply challenges are generally more like the ‘typical’ issues we experienced before the pandemic. We are closely monitoring the global banking situation, but no impacts have been experienced or are expected at this time. Ongoing tensions between the U.S. and China are another issue to watch.” [Miscellaneous Manufacturing]
  • “New orders are starting to soften and supplier deliveries are improving slightly. This is allowing us to reduce (our) backlog and build a buffer in some categories. The supply chain disruption — particularly in electronics — is still significant compared to pre-pandemic conditions.” [Electrical Equipment, Appliances & Components]

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