Prices are rising but orders slowing. Production has collapsed.
Please consider the April 2025 Manufacturing ISM® Report On Business® by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management®.
The U.S. manufacturing sector contracted in April for the second consecutive month after two months of expansion preceded by 26 months of contraction. The Manufacturing PMI® registered 48.7 percent, 0.3 percentage point lower compared to the 49 percent reported in March. “After reversing its recent momentum in March, the Manufacturing PMI® again registered below its reading in December. Of the five subindexes that directly factor into the Manufacturing PMI®, two (Supplier Deliveries and Inventories) were in expansion territory, the same as last month. Slower supplier deliveries and slightly expanded inventories in April are not considered positives for the economy: Both conditions figure to be temporary and are driven by tariff concerns, either delaying buyer/seller negotiations or advancing material deliveries that will be reversed after tariffs are deployed, leading to a drawdown of manufacturing inventory. Although the Employment and New Orders indexes recovered somewhat, they remained in contraction.
Of the six biggest manufacturing industries, four (Petroleum & Coal Products; Computer & Electronic Products; Machinery; and Chemical Products) registered growth. A reading above 50 percent indicates that the manufacturing sector is generally expanding; below 50 percent indicates that it is generally contracting.
“Demand and production retreated and destaffing continued, as panelists’ companies responded to an unknown economic environment. Prices growth accelerated slightly due to tariffs, causing new order placement backlogs, supplier delivery slowdowns and manufacturing inventory growth. Forty-one percent of manufacturing gross domestic product (GDP) contracted in April, down from 46 percent in March. The share of manufacturing sector GDP registering a composite PMI® calculation at or below 45 percent (a good barometer of overall manufacturing weakness) was 18 percent in April, an 11-percentage point increase compared to the 7 percent reported in March. Of the six largest manufacturing industries, four (Petroleum & Coal Products; Computer & Electronic Products; Machinery; and Chemical Products) expanded in April, one more as compared to March,” says Fiore.
Prices
The ISM® Prices Index registered 69.8 percent in April, increasing 0.4 percentage point compared to the March reading of 69.4 percent, indicating raw materials prices increased for the seventh straight month after a decrease in September. The Prices Index has increased 15 percentage points over the past six months to record its highest reading since June 2022 (78.5 percent). Of the six largest manufacturing industries, five — Machinery; Chemical Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Transportation Equipment — reported price increases in April. “The Prices Index indicated increasing prices in April for the seventh consecutive month, driven by increases in steel and aluminum prices impacting the entire value chain, as well as the general 10-percent tariff applied to many imported goods. Forty-nine percent of companies reported higher prices in April, compared to 46 percent in March. This share has consistently increased over the past six months, from a low of 12.2 percent in November,” says Fiore. A Prices Index above 52.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Producer Price Index for Intermediate Materials.
In April, the 15 industries that reported paying increased prices for raw materials, in order, are: Textile Mills; Furniture & Related Products; Nonmetallic Mineral Products; Machinery; Miscellaneous Manufacturing; Fabricated Metal Products; Chemical Products; Food, Beverage & Tobacco Products; Primary Metals; Paper Products; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Wood Products; and Plastics & Rubber Products. No industries reported paying decreased prices for raw materials in April.
What Respondents Are Saying
- “Uncertainty over tariffs is providing a big challenge from both Tier-1 suppliers we will have to pay tariffs on directly and Tier-2 suppliers that will try to pass tariffs through to us in the form of price increases and tariff surcharges.” [Chemical Products]
- “Tariffs impacting operations — specifically, delayed border crossings and duties calculations that are complex and not completely understood. As a result, we are potentially overpaying duties. Unsure of potential drawbacks. Implementation of tariffs and their application is sudden and abrupt. The business is taking countermeasures.” [Transportation Equipment]
- “Business climate is apprehensive, and with tariff costs implemented, all inbound Chinese shipments are on hold. It is not feasible for our business or customers to sustain the pricing required to provide an acceptable margin.” [Computer & Electronic Products]
- “The most important topic is tariffs. Risks include margin erosion due to rising operational costs and freight delays disrupting delivery timelines. Supplier relationships are strained by pain-share negotiations, and competitors are gaining share by importing from lower-tariff regions.” [Food, Beverage & Tobacco Products]
- “Tariff whiplash is causing us major issues with customers. The two issues we are seeing: (1) customers are holding back orders to understand what is happening with tariffs on their products or (2) they are forcing us to accept the tariffs, which causes us to ‘no quote’ the job as we cannot take on that type of risk for an order.” [Machinery]
- “There is a lot of concern about the inflationary impacts from tariffs in our industry. Domestic producers are charging more for everything because they can.” [Fabricated Metal Products]
- “Tariff trade wars are incredibly volatile, quickly changing, and disrupting a ton of our current work. We are 90 percent sourced out of China, and the cost models keep changing every week. We are flying to visit suppliers in a few weeks to negotiate current terms and pricing, as well as develop more long-term, strategic plans to reduce risk in the region.” [Apparel, Leather & Allied Products]
- “Demand is slightly lower than plan, but it has been steady amid tariff concerns. Significant time has been spent quantifying the impact of changing tariff rates. Our costs will increase, and we are discussing how to share that impact across suppliers and customers.” [Electrical Equipment, Appliances & Components]
- “The recently imposed 145-percent tariff rate on Chinese imports is significantly affecting our 2025 profitability. Due to the complexity of our parts and the lack of alternate sources, we are unable to find any alternate suppliers — especially at a reasonable cost — to our current Chinese sources. Incoming orders have slowed due to market volatility and uncertainty.” [Miscellaneous Manufacturing]
- “Strategic procurement and the supply chain are paralyzed in a world that changes daily due to tariffs.” [Nonmetallic Mineral Products]
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