US May ISM Manufacturing PMI Rises to 54, Fastest Expansion in Four Years
N.R. Finch
The U.S. ISM manufacturing PMI hit 54.0 in May — a four-year high and a fifth straight month of expansion — but the Iran conflict is disrupting supply chains and driving up costs, making the sector's real health far more fragile than the headline suggests.
How strong is 54.0, really?
The ISM manufacturing PMI rose from 52.7 to 54.0, the highest since May 2022. Manufacturing has now expanded for five consecutive months — the longest streak in four years.
S&P Global's U.S. manufacturing PMI came in at 55.1, also the highest since April 2022, confirming the ISM reading.
This means → two independent gauges point to the same conclusion: U.S. manufacturing is running at its strongest pace in four years.
If the data looks great, why are companies nervous?
A senior executive surveyed by ISM described the climate as one of "extreme uncertainty," citing deep concerns over the Iran conflict and a potential Strait of Hormuz closure disrupting long-term supply.
The conflict has pushed up oil prices and scrambled access to raw materials. Supplier delivery delays hit their highest since August 2022.
In plain terms = part of the expansion is companies panic-buying inventory, not genuine demand-driven growth. They are stockpiling out of fear, not confidence.
How serious is the price pressure?
The ISM input-price index eased slightly from 84.6 to 82.1 but remains near its highest since 2022.
S&P Global chief economist Chris Williamson warned that surging production costs signal broader inflation ahead in coming months.
The Fed's preferred inflation gauge — April core PCE — rose 3.8% year-on-year, roughly double the 2% target. This means → cost pressure at the factory gate has not fully passed through to consumers yet. Inflation may not have peaked.
Orders are rising, but employment is shrinking — why?
The new-orders index climbed from 54.1 to 56.8, a four-month high. Export orders and backlogs both improved.
Yet the employment index only edged up from 46.4 to 48.6 — still contracting for the 32nd straight month. Since January 2025, manufacturing has shed roughly 77,000 jobs.
This reflects a clear corporate playbook: "take the orders, skip the hires." Firms are absorbing demand through inventory and overtime, refusing to add headcount in an uncertain environment.
When the stockpiling stops, can growth hold up?
Williamson stated explicitly: since the Middle East conflict began, corporate stockpiling has visibly boosted production and demand, making the sector's underlying health harder to assess.
In plain terms = some of today's PMI strength is "fear-driven inventory" padding the numbers. Once the stockpiling cycle ends, growth will cool.
After the data release, the Dow and S&P 500 dipped slightly but stayed near record highs. This means → the market's read matches Williamson's — the numbers look good, but not good enough to chase.
Content is for reference only, not financial advice.