March Manufacturing and Services PMIs Moved Down, With Larger Ills Looming

By SBE Council at 3 April, 2025, 2:28 pm

by Raymond J. Keating -

The Institute for Supply Management's purchasing managers index (PMI) for manufacturing and for services both moved down in March.

After two months of expansion, the manufacturing PMI declined into contraction territory with a reading of 49 percent (versus 50.3 percent in February). Prior to shifting into expansion territory in January and February, the manufacturing PMI had been in contraction mode for 26 consecutive months.

Meanwhile, the services PMI pointed to nine consecutive months of expansion. But the March reading of 50.8 percent was down by 2.7 percentage points from February's 53.5 percent.

Given the massive tariffs being imposed by President Trump, there are few reasons to believe that either of these readings will be moving in the right direction in coming months, given the likely scenarios of increasing input costs due to tariffs, tariff negatives for supply chains, and retaliatory measures by other nations.

Indeed, a few points from these two reports point to such woes:

● "New Export Orders Index dropping into contraction…"

● From a respondent: "The tariffs have caused issues in the groundwood paper market especially. With a large amount of groundwood imported from Canada to the U.S., the tariffs and resulting delays have caused havoc with the supply chain and deliveries. U.S. mills are getting backlogged and late from the additional tonnage they've taken on."

● From a respondent in the machinery sector: "Business condition is deteriorating at a fast pace. Tariffs and economic uncertainty are making the current business environment challenging."

● And from the general manufacturing sector: "Newly implemented tariffs are significantly impacting gross profits. Canada's new tariffs on U.S. goods are significantly impacting orders from that country. Quotes and sales are lower from Europe due to the threat of retaliatory tariffs."

Indeed, given that the U.S. ranks as the second largest exporter in the world, and that nearly every import is an input to a domestic business, the risks and uncertainties have reached critical levels, with negatives rippling across the entire economy.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. He is the author of " The Weekly Economist " book series, and 10 Points from Walt Disney on Entrepreneurship .