U.S. manufacturing activity declines due to new tariffs

Business activity in the U.S. manufacturing sector declined in March, according to preliminary data from S&P Global. The Purchasing Managers' Index (PMI) fell to 49.8 points from 52.7 points in February. A reading below 50 indicates a contraction in business activity. This is the first time the index dropped below 50 since last year, linked to the anticipation of tariffs announced by President Donald Trump. The current decline is attributed to the implementation of these tariffs. Companies are also feeling uncertain due to conflicting statements from Trump. Businesses reported a slowdown in new orders and a decrease in delivery delays, which is seen as a negative trend, indicating that supply chains are not fully utilized. Expectations for future economic activity dropped as well, with the index falling to 62 points from 70 points in February. This level has only been seen during the pandemic. The last significant decline occurred in September due to uncertainty surrounding the upcoming presidential elections. The lower expectations are largely due to concerns regarding tariffs on key trade partners, which have already caused costs to rise for major companies. Despite the slowdown in manufacturing, the composite PMI for the U.S. rose to 53.5 points in March, up from 51.6 points in February. This increase was driven by growth in the services sector, where the index rose to 54.3 points from 51 points in February. S&P Global attributes this bounce back to a temporary recovery after adverse weather earlier in the year. Overall, the PMI data suggests that U.S. GDP growth in the first quarter of 2025 will slow to 1.5%, down from an estimated 2.3% in the fourth quarter of 2024.