ISM® PMI® Reports Roundup: May Manufacturing
It was yet another month of interesting comments in the ISM® Manufacturing PMI® Report, as panelists remained worried about elevated prices and Iran war-related supply continuity.
At some point, however, the focus shift to what could happen to what is: Five straight months of manufacturing sector expansion, with what can now be termed pent-up demand leading to sustained buying. Those dynamics were reflected in May, with a Manufacturing PMI® of 54 percent, the highest reading in four years.
“I’m happy to give a positive report,” Susan Spence, MBA, Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee, told a conference call of reporters on Monday. “It’s the first one in a while.”
May ISM Manufacturing PMI up to four-year high of 54.0 vs. 53.0 est. & 52.7 prior … new orders up to 56.8 vs. 54.1 prior; prices paid down to 82.1 vs. 84.6 prior … employment up to 48.6 vs. 46.4 prior pic.twitter.com/uADH5uKHL4
— Liz Ann Sonders (@LizAnnSonders) June 1, 2026
There is still a lot for contrarians — panelists’ comments overall remained mostly negative, with a respondent in Electrical Equipment, Appliances & Components mentioning a “panic” in that industry. And momentum could wane the longer the conflict in Iran drags on.
But with key demand gauges on multimonth growth periods and tariffs anxiety largely in the past, U.S. factory activity is in a true growth cycle, Spence said. The New Orders (56.8 percent) and Backlog of Orders (52.2 percent) indexes expanded for a fifth straight month, and the New Export Orders Index (50.6 percent) returned to expansion. There was little to no evidence that such buying was to get ahead of new tariffs or price increases, as was the case earlier in the year.
“Maybe in January, it was a matter restocking shelves, but I believe we have genuine demand here,” Spence said. “I would really love to see what these indexes would look like without the conflict in the Middle East. My feeling is that if that the conflict ends soon, we’ll start to see some sustained expansion.”
She added, “I think we can say it’s not a spike at this point. A couple of months may be a spike, but five months is not.”
With the Production Index (54.3 percent) in robust expansion, the burning question: Will the Employment Index follow?
At 48.6 percent, the index contracted for a 32nd consecutive month but was up 2.2 percentage points compared to April, and Spence was encouraged by the 1-to-1 ratio of hiring versus reductions among panelist comments. However, this is not the first time in the last 2½ years that the Employment Index has teased a return to expansion.
“Companies have been holding back because of the uncertainty, but now they might be holding back less,” said Spence, who noted that the last 1-to-1 Employment Index comments ratio was in April 2025. “There is sentiment brewing that people are finally hiring.”
Though it could be argued that all of the 10 subindexes were in a location or moved in the direction supply mangers and economists like to see, the data wasn’t all rosy. The Supplier Deliveries Index registered 60.6 percent, matching its April reading and staying at its highest level since May 2022 (65.7 percent). That’s a product of higher demand, but also of delivery delays or disruption related to Middle East turmoil and other issues.
Respondents to the May ISM Manufacturing survey have a key concern: prices pic.twitter.com/bBEAvwNqWI
— Kevin Gordon (@KevRGordon) June 1, 2026
The Prices Index decreased 2.5 percentage points to 82.1 percent, with 43 commodities reported as up in price and none listed as down. Prices are the biggest impediment to sustained manufacturing expansion, Spence said.
Meanwhile, panelist comments cannot be dismissed. A respondent in Miscellaneous Manufacturing best summed up the sentiment: “The current atmosphere is one of extreme uncertainty and concern for the future in terms of both price stability and longer-term supply continuity related to the Iran conflict and Strait of Hormuz closure. We have a lot of negotiations in process related to requested price increases, some related to oil prices and some still fallout from the 2025 tariff/geopolitical climate.”
Overall, 25 percent of comments were positive, 69 percent negative. The war in Iran remains a significant wild card, and though just 18 percent of comments were about tariffs — with most of those “in the past tense,” Spence said — that could change depending on the Trump administration’s response to the 150-day limit on its Section 122 replacement tariffs expiring in July.
“It’s the best combination (of index readings) that we’ve had in a while,” Spence said. “I feel like as long as the demand indicators continue to be positive and grow, (employment) and the rest will eventually come along. But pricing could choke things off — that’s the worry.”
The ISM® PMI® Reports roundup:
Barron’s: Manufacturing Is Going Strong. It Strings Together Five Straight Months of Growth. “Still, industrial businesses are concerned. In May, nearly 70 percent of comments from manufacturers were negative, (Spence) said. Almost half of the commenters mentioned the Iran war and a fifth mentioned tariffs. Pricing volatility came up in 57 percent of the responses. … The uncertainty is weighing on hiring.”
Bloomberg: U.S. Manufacturing Activity Expands by Most in Four Years. “The (PMI®) has now signaled expansion for five straight months, pointing to renewed vigor in the manufacturing sector amid a surge in artificial intelligence investment, more favorable tax provisions and diminished trade policy uncertainty. … New orders growth accelerated to a four-month high, as factory production also gained steam.”
CNBC: May ISM Manufacturing PMI® at 54%, Highest Reading Since May 2022. “For the month of May, 54 percent is a full point above expectations and the strongest reading since going back to May 2022,” analyst Rick Santelli said. “Manufacturing, at least anecdotally (or) based on many numbers, is starting to pick up. If we look at (the Prices Index), not great news but better news: 82.1 percent, still lofty, but we were expecting a number around 85 percent.”
Logistics Management: May Manufacturing Output Grows for Fifth Consecutive Month, Reports ISM. “While Prices ebbed in May, they remain at a very elevated level, the report observed, driven largely by the Iran conflict, while tariffs did not receive as much attention in the report—which could be subject to change depending on what happens when the current 10% Section 122 tariffs expire in late (July).”
Manufacturing Dive: U.S. Manufacturing Expands to Highest Level Since May 2022. “Many commentators also cited the war in Iran as their chief point of concern, with one commentator in the transportation equipment sector saying that the conflict is ‘starting to directly and negatively impact cost of supply chain.’ Others cited shipping delays, higher fuel and raw material prices and general market uncertainty.”
MarketWatch: U.S. Manufacturers Extend Best Hot Streak Since 2022, So Why Aren’t Business Leaders Happy? “American manufacturers are growing despite headwinds from the Iran war and the uncertain legal status of the Trump tariffs. A boom in investment in AI is a chief reason. The (sector) could experience a prolonged boom if the Iran war ends and tariff levels become more settled.”
A very weird manufacturing PMI, the sector is growing and the growth is accelerating (consistent with @FreightAlley's view), but manufacturing employment is contracting. And the comments from purchasing managers are deeply pessimistic on the war in Iran. https://t.co/lxqoqZ3Mne pic.twitter.com/NBRbOMUP1m
— Matt Stoller (@matthewstoller) June 1, 2026
Reuters: U.S. Manufacturing Activity Scales Four-Year High in May, ISM Says. “(The Supplier Deliveries Index) was unchanged at a high reading of 60.6 percent. … Supply chains were already strained by last year’s sweeping tariffs on imports, which were struck down in February by the U.S. Supreme Court. President Donald Trump’s administration has imposed new duties and defended the tariffs as necessary to revive the domestic industrial base.”
The Wall Street Journal: U.S. Factory Activity Expands in May. “Analysts polled by The Wall Street Journal expected a reading of 53.2 percent. The Prices Index remained in expansion but decreased from April. The New Orders Index expanded for the fifth consecutive month after four straight readings in contraction. The Production Index also continued to grow.”
The ISM® Services PMI® Report will be unveiled on Wednesday. Also, the ISM® Supply Chain Planning Forecast for the manufacturing and services sectors will be released on June 17. For the most up-to-date content on the ISM® PMI® Reports, use #ISMPMI on X, formerly known as Twitter.