Manufacturing across the United States saw stronger-than-anticipated growth last month, climbing to its best performance in four years as companies scramble to secure orders amid supply disruptions and rising costs linked to the ongoing war with Iran.
Data released Monday by the Institute for Supply Management showed the manufacturing index climbed to 54.0 in May, up from April’s 52.7 reading. This marks the strongest showing since May 2022. Any figure above 50 signals growth in the manufacturing sector, which represents 9.4% of the nation’s economy. Market analysts had predicted a more modest increase to 53.
The sector has now posted expansion for five consecutive months, fueled primarily by heavy spending on artificial intelligence technology.
Ongoing conflict between the U.S.-Israeli alliance and Iran has resulted in the closure of the Strait of Hormuz, creating major disruptions to commodity shipping routes and driving up costs for energy, aluminum and fertilizer products.
New orders within the ISM report jumped to 56.8 last month, rising from April’s 54.1 figure. The data also showed increases in both order backlogs and export activity.
The supplier delivery index held steady at an elevated 60.6 reading. Numbers above 50 reflect slower delivery times. Supply networks were already under pressure from comprehensive import tariffs implemented last year, though the U.S. Supreme Court overturned these measures in February. President Donald Trump’s administration has introduced additional duties while arguing such measures are essential for rebuilding domestic manufacturing capacity.
With delivery performance remaining poor, factory-level prices kept climbing, though the rate of increase moderated somewhat in May. The survey’s input cost index dropped slightly to 82.1 from April’s 84.6, which had been the highest since April 2022. This came in below the predicted 85.0 level. The military conflict continues pushing prices upward, with inflationary pressures spreading beyond just energy products.
Government data released last week showed inflation accelerated at its fastest rate in three years during April. Rising prices that are cutting into household spending power have led financial markets to anticipate the Federal Reserve will maintain its key interest rate between 3.50% and 3.75% through next year.
Even with order increases, factory hiring remained weak last month. The ISM’s employment measure recorded its 32nd consecutive month of decline following brief growth in September 2023. The organization noted that workforce management rather than expansion continues as the standard approach in manufacturing, typically through job cuts, natural turnover and leaving positions unfilled.
Factory employment has dropped by approximately 77,000 positions since January 2025.
