Despite an unsteady month for manufacturers marked by the conflict in Iran, economists anticipate the Institute for Supply Management’s March Purchasing Managers’ Index will be positive. The report will reflect instability in the market with rising oil prices and global supply chain disruption. Bloomberg estimates on Monday placed the Index at 52.4, the same rating as February, which signals expansion.
Here are five things to watch in the upcoming PMI data:
1. Manufacturing employment may grow
Regional surveys by Federal Reserve banks and the S&P Global US Flash PMI reported slight increases in manufacturing employment in March, which is likely to be reflected in the ISM numbers tomorrow.
Still, manufacturing employment has remained low for the past eight months, tied to high prices and an unclear economic forecast in the near future. Continued uncertainties may push employers to freeze hiring or reduce labor costs.
2. Rebound from poor weather in February
Snowstorms in the Northeast and South U.S. hampered output from some sectors in February, which dampened the prior month’s index. March’s weather has remained mostly normal in many parts of the country, so economists expect any role weather played in the past month to be negligible in the upcoming report.
3. Energy costs driving prices
Blockades in the Middle East have caused prices to rise in anticipation of reduced global oil supply, in turn driving energy costs sky-high. Oil costs remained above $100 per barrel throughout March.
The jump will likely impact prices, particularly for imported products. The higher import costs could provide a boost to domestic manufacturers, who are already reporting increased activity in March compared to the year prior, but will likely increase costs across the board. ISM’s February data showed prices have kept climbing for the past year and a half, with exceptionally high prices for steel and aluminum.
4. New orders are likely to drop
As market conditions remain tumultuous, demand is expected to soften. Uncertain tariff policies from the Trump administration continue to impact consumer and business customers’ confidence, which could result in lower orders numbers in March, particularly among exports.
Inflation growth over the past few months has remained steady, putting additional pressure on buyers.
The S&P PMI did report a rise in new orders, which could be a rush among customers to tackle prices before they increase any further, as the future of the Iran war remains unclear.
5. Supply chain disruptions could extend
The war in Iran is disrupting supply chain routes, driving costs higher for imports and exports in some regions. While some manufacturers may have enough supply to weather six weeks of disruption, if the war continues, there could be longer-term disruptions that trickle into April and May data.
