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- US manufacturing grew for the third straight month, but Middle East disruptions are driving factory prices to near four-year highs.
- Retail sales rose 0.6% in February, but gas prices topping $4 a gallon could squeeze consumer spending ahead.
- Private sector hiring added 62,000 jobs in March, led by health care and small businesses.
The US economy is sending mixed signals to markets, with manufacturing growing, retail sales rising, and hiring continuing.
But behind the scenes, the conflict in the Middle East is pushing prices higher, disrupting supply chains, and casting a shadow over what lies ahead.
Manufacturing Picks Up, But Costs Are Rising
ISM manufacturing PMI expanded for the third straight month in March, reporting a figure of 52.7 and reaching its highest level since August 2022. ⁽¹⁾
However, not everything behind that number is reassuring. Part of the increase came from suppliers taking longer to deliver materials to factories. In normal times, slower deliveries mean businesses are so busy that supply chains are stretched.
Right now, though, the delays point to something more troubling: disrupted trade routes caused by the conflict in the Middle East. ⁽²⁾
The regional tensions have led to more restricted shipping through the Strait of Hormuz, sending oil prices higher and affecting the supply chains of goods like fertilizer and aluminum.
Because materials are harder to get, factories are paying more for them. The ISM’s prices-paid index jumped to 78.3 in March, its highest point since June 2022, up from 70.5 in February. Higher input costs for manufacturers often mean higher prices for everyone down the line. ⁽³⁾
Tariffs Are Still Holding Manufacturing Back
Even with the PMI rising, the manufacturing sector faces another headwind, tariffs. The import duties introduced by President Trump were struck down by the US Supreme Court, but Trump has since announced a new global duty.
The sector, which makes up about 10% of the US economy, has not seen the comeback Trump had hoped tariffs would deliver.
New orders, a key sign of future activity, actually fell in March, dropping from 55.8 to 53.5. Order backlogs grew more slowly, and factory hiring remained weak. Since January 2025, manufacturing has lost 100,000 jobs. ⁽⁴⁾
Retail Sales Rise, but War Could Lead to Slow Spending
February’s retail sales report also showed good figures, coming at 0.6%, witnessing its biggest gain since July of last year. The report shows that the US economy remained in good shape before the war began. ⁽⁵⁾
But economists are now worried about what comes next. The national average price of gasoline has topped $4 a gallon for the first time in more than three years, driven by surging oil prices. If gas prices stay high, families will have less money to spend on other things, which could offset the economic boost expected from recent tax cuts. ⁽⁶⁾
The delayed Commerce Department report, released on Wednesday, covered February’s activity and predates the full impact of the war. The months ahead are expected to be more difficult.
Job Growth Continues, Led by Small Businesses and Health Care
Private sector hiring held up in March, with 62,000 jobs added according to ADP. That was above expectations and only slightly below February’s revised total. Government workers are not included in ADP’s figures.
As in the previous month, two sectors drove nearly all the growth. Education and health services added 58,000 jobs, while construction contributed 30,000.
Other sectors showed modest gains. Information services added 16,000 jobs, natural resources and mining gained 11,000, and leisure and hospitality added 7,000. On the other side, trade, transportation, and utilities lost 58,000 workers, and manufacturing shed another 11,000. ⁽⁷⁾
Wages continued to grow. Workers who stayed in their jobs saw pay rise 4.5%, while those who changed jobs earned 6.6% more, up slightly from February. ⁽⁸⁾
The official government jobs report, Nonfarm payrolls, is due on Friday. Economists expect it to show a gain of around 60,000 jobs and an unemployment rate holding steady at 4.4%. ⁽⁹⁾
