Don’t look now, but the marquee gauge of US factory activity just printed in expansion territory for a third consecutive month.

That’s the good news. There’s bad news too. Hold that thought.

As the figure below shows, this is the best run for the ISM manufacturing headline in three and a half years.

At 52.7, Wednesday’s readout was ahead of estimates and the highest since August of 2022.

That’s more or less where the good news stopped. The New Orders gauge fell nearly 2.5ppt from February to 53.5, the New Export Orders gauge fell back into contraction and the Employment index remained below 50 for a 14th month.

The Prices gauge was “yikes!” And by that I mean it printed — steel yourself — 78.3.

As the figure shows, this marks the second straight outsized jump on that index, which now sits at nosebleed levels consistent with those witnessed during the worst of the 2022 inflation panic.

The panelist anecdotes were littered with cautionary references to the war. “Geopolitical tensions… are contributing to rising manufacturing supply costs,” someone in Chemical Products said.

The war with Iran’s “creat[ing] domestic and global turmoil,” a respondent in the Plastics business remarked, adding that “feedstocks and finished product pricing are accelerating dramatically.”

Presiding ISM Chair Susan Spence summed it up, noting that around two thirds of comments were negative this month.

“Among the negative comments, about 20% cited tariffs and about 40% the war,” she said. “Some panelists referenced both.”