U.S. Manufacturing Sector Expands for Fifth Consecutive Month Amid Geopolitical Pressures

Event summary

  • The ISM Manufacturing PMI® registered 54% in May 2026, up 1.3 percentage points from April, marking the highest reading since May 2022.
  • New Orders and Production Indexes expanded for the fifth and seventh consecutive months, respectively, while Employment and Inventories indexes remained in contraction but improved.
  • The Prices Index remained high at 82.1%, indicating persistent inflationary pressures, with 57% of panelists citing pricing volatility as an issue.
  • The Iran conflict and tariffs were mentioned by 42% and 18% of respondents, respectively, as significant challenges impacting supply chains and costs.

The big picture

The U.S. manufacturing sector is experiencing a period of expansion amid significant geopolitical and economic challenges. The sustained growth in new orders and production, coupled with high inflation and supply chain disruptions, highlights the sector's resilience but also its vulnerabilities. The broader economy's expansion, indicated by the Manufacturing PMI®, suggests a robust industrial base, though the impact of external factors like the Iran conflict and tariffs remains a critical watchpoint for sustained growth.

What we're watching

Geopolitical Risks
How the Iran conflict will continue to impact oil prices and supply chain stability, particularly for industries reliant on petroleum-based products.
Inflationary Pressures
Whether the high Prices Index will sustain or moderate, affecting profit margins and operational costs across manufacturing sectors.
Employment Trends
The pace at which employment in manufacturing will recover, given the current contraction and the split between companies managing headcounts and those hiring.