Ongoing manufacturing growth remained intact in May, growing for the fifth consecutive month, according to the new edition of the Manufacturing Report on Business, which was issued today by the Institute for Supply Management (ISM).

The report’s benchmark reading, the PMI, registered a reading of 54 (a reading above 50 indicates growth), topping April by 1.3%, and growing, at a faster rate, for the fifth consecutive month, following April’s 52.7. Which was preceded by a matching 52.7 in March, with January and February posted readings of 52.6 and 52.4, respectively, with January representing the first positive PMI reading since February 2025’s 50.0. ISM added that the overall economy grew, at a faster rate, for the 19^th consecutive month. This marks the highest monthly PMI reading since Mzay 2022, when it was at 55.9.   

The May PMI reading was 3.6% above the 12-month average of 50.4, with May marking the highest and December’s 47.9 marking the lowest for that period.

ISM reported that 16 manufacturing sectors expanded in May, including: Printing & Related Support Activities; Textile Mills; Nonmetallic Mineral Products; Paper Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Primary Metals; Miscellaneous Manufacturing; Computer & Electronic Products; Furniture & Related Products; Machinery; Transportation Equipment; Petroleum & Coal Products; Chemical Products; Fabricated Metal Products; and Food, Beverage & Tobacco Products. The lone contracting sector was Wood Products.

ISM cited the following key metrics for May:

• New Orders: 56.8, up 2.7%, growing, at a faster pace for the fifth consecutive month, with 14 sectors reporting growth;

• Production: 54.3, up 0.9%, growing, at a faster rate, for the seventh consecutive month, with 14 sectors reporting growth;

• Employment: 48.6, up 2.2%, contracting at a slower rate for the 32nd consecutive month and declining in 40 of the last 41 months, with nine sectors reporting growth;

• Supplier Deliveries: 60.6 (readings above 50 indicate slower deliveries), flat compared to April, with 14 sectors reporting slower deliveries;

• Inventories: 49.9, up 0.9 points, contracting at a slower rate for the 13th consecutive month, with nine sectors reporting higher inventories;

• Customers’ Inventories: 42.7, up 3.6%, remaining too low at a faster rate for the 20th consecutive month, with two sectors reporting higher inventories; and

• Prices: 82.1, down 2.5% off of April’s 84.6 (which marked the highest reading since April 2022, when it also reached 84.6), increasing, at a slower rate, for the 20^th consecutive month, with 16 sectors reporting higher prices

Economic conditions, tariffs, and the ongoing Iran conflict were among the main themes cited in panelists’ comments.

A Transportation Equipment panelist said that the impact of the Iran conflict is starting to directly and negatively impact cost of supply chain, noting that oil and related commodities are escalating in price.

“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,” said a Miscellaneous Manufacturing panelist. “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.”

In an interview with LM, Susan Spence, Chair of ISM’s Manufacturing Business Survey Committee said that the May report marks the first time since she stepped into her ISM role a year ago that each of the report’s metrics had positive readings.

“Looking at demand indicators, with the exception of Customers’ Inventories, which is also going up not in expansion territory, there was solid growth,” she said. “Companies are starting to order more so it makes sense that there is inventory replenishment. New Exports expanding [up 2.7% to 50.6], Backlog of Orders up five months in a row, and Production growing for seven months in a row are positive. When Production was up for two months straight, it was questioned, but then New Orders caught up with it.”

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 January.

“What I hope does not happen is that the war ends, followed by a month of relief and then a new batch of tariffs,” said Spence. “If the Section 122’s had been what companies had to deal with from the beginning, it may have been easier to absorb, but some companies have gotten battered and paid very high tariffs of 50%, in some cases, while pricing continues to rise. It is not to say that the mid-terms are going to influence policy, but they could. But people have short memories. There could be moves that are going to be made to be friendly for the consumer with that in mind—which could help.”