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Global Factory Activity: Tariff Announcements Pressure US Manufacturers as Price Increases Loom

With global tensions high over trade issues, politics and tariffs, manufacturing has faced challenging times in the first quarter of the year.

Looking at the monthly Global Manufacturing Purchasing Managers’ Index (PMI) for key sourcing countries, the U.S. has hit on a high growth period, though looming cost increases that could come from newly levied tariffs could curb that growth in the coming months. For China, which is in the midst of a tariff battle with the U.S., new factory orders and exports have been muted.

Here’s a look at PMI across major manufacturing countries for March.

United States

Manufacturing in the United States has seen its strongest growth in three years, despite political and trade tensions that might seem to indicate otherwise.

In March, the PMI climbed to 55.6 (a PMI of 50 is neutral, with numbers above it indicating growth, and below pointing to contraction), up from February’s 55.3, as output and new orders have increased “markedly” on ramped up demand.

“U.S. factories reported a strong end to the first quarter, with the PMI advancing to a three-year high. The goods producing sector should therefore make a positive contribution to economic growth in the first quarter, as rising demand fueled further improvements in factory production,” IHS Markit chief business economist Chris Williamson said.

As such, there’s been optimism about the year ahead, though the ongoing tariff battles—largely between the U.S. and China over steel and intellectual property rights—have contributed to inventory stockpiles.

“Recent tariff announcements were already reported to have added to inflationary pressures, and also led to the stockpiling of goods expected to rise further in price in coming months,” Williamson said. “Input cost inflation consequently hit the highest since 2012. Increased costs were often passed on to customers, meaning prices charged for goods at the factory gate showed the steepest rise in over four years.”


China’s manufacturing sector has seen its weakest growth in production and new orders in four months, and export sales have increased only slightly.

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The PMI for March was 51, down from 51.6 in February.

New work placed with Chinese manufacturers did increase in the month, but the pace of that expansion has slowed as the country faces “muted” foreign demand.

“Overall, the manufacturing PMI reading in March showed that demand was not as strong as expected, leading to lower willingness of manufacturers to produce and restock. However, the ability of manufacturers to make a profit was beefed up by the stable increase in new orders and the much slower jump in input costs,” Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said. “The growth momentum of the Chinese manufacturing economy may have weakened in March, but at a marginal pace.”


For Canada, manufacturing growth remained strong, though cost inflation hit a four-year high.

In March, Canada’s PMI came in at 55.7, up nominally from February’s 55.6.

New orders increased at a robust pace for the 18th month in a row thanks to greater sales to domestic and export clients. Input cost inflation, however, increased considerably, which IHS Markit owed to higher prices for steel and chemicals. Higher operating expenses also led to a rise in factory gate charges.

“Intense supply chain pressures and sharply rising raw material costs have been key headwinds for Canadian manufacturing companies so far this year,” IHS Markit associate director Tim Moore, said. “The latest survey indicated that input price inflation was the highest for around four years, reflecting strong cost pressures for end users of steel and chemicals in particular.”

Adding to that, Supply Chain Management Association (SCMA) president and CEO Christian Buhagiar, said manufacturers are still upbeat about their growth prospects for the coming year and many have boosted production capacity.

“The main concern at present is overstretched supply chains, as highlighted by another steep lengthening of delivery times for raw materials and semi-manufactured inputs,” Buhagiar said.


Factory activity has expanded in Mexico, which fueled jobs, but both input costs and output charges increased at sharper rates.

Mexico’s PMI for March was 52.4, up from 51.6 in February.

New order growth reached a four-month high in the month as new export orders recovered from a contraction seen in February. In line with that, input costs experienced their strongest acceleration in 10 months as manufacturers indicated higher prices for energy, fuel, gas and raw materials. The peso’s depreciation against the U.S. dollar didn’t help matters either.

“In the case that inflationary pressures ease, improvements in consumer spending power are expected to boost overall consumption,” IHS Markit principal economist Pollyanna De Lima said. “The other side of the coin to tighter monetary policy being an impeding postponement of private sector investment, however.”


In Turkey, manufacturing output and new orders have increased, and so have cost burdens.

The PMI for Turkey in March, however, fell to 51.8 from 55.6 in February.

Output rose for the 14th straight month in the face of “stronger underlying demand.” Manufacturers scaled up their purchasing activity in March, though at a slower pace than in February. Cost burdens continued to rise in line with unfavorable exchange rates.

“On the price front, rising input costs drove up average selling prices in the manufacturing sector,” the Istanbul Chamber of Industry noted. “Accordingly, output prices in the Turkish manufacturing sector rose at a faster pace.”