The contraction registered by the Institute for Supply Management will provide some respite for the U.S. Federal Reserve, which has raised its benchmark lending rate nine times in the past 13 months to try and reduce demand to tackle high inflation.
The March data “reflects companies continuing to slow outputs to better match the demand for the first half of 2023 and prepare for growth in the late summer/early fall period,” ISM manufacturing survey chair said in a statement.
The ISM manufacturing survey dropped to 46.3% last month, down 1.4 percentage points from 47.7% in February.
This was more than a percentage point lower than the expectations of analysts surveyed by Briefing.com.
A reading below 50% indicates that U.S. manufacturing is generally contracting.
On the demand side, the New Orders Index registered a sharper contraction last month, falling by 2.7 percentage points to 44.3%, while the New Export Orders Index remained in contraction territory, according to the ISM report.