Manufacturing PMI at 48.5% in May 2025: ISM Report

The May 2025 Manufacturing ISM® Report On Business® reveals a mixed picture of the U.S. manufacturing sector. While some indicators show signs of slowing contraction, overall activity continues to decline.

Demand:

Demand indicators presented a mixed scenario. The New Orders Index contracted for the fourth consecutive month, registering 47.6%, a slight increase from April. The Backlog of Orders Index also contracted, but at a slower rate. However, the Customers' Inventories Index remained 'too low,' which is typically a positive sign for future production. The New Export Orders Index contracted more strongly, indicating weakening international demand.

Output:

The Production Index improved slightly to 45.4% but remained in contraction territory. This suggests that factories are still adjusting production plans downward due to economic uncertainty. The Employment Index also remained in contraction, with companies continuing to reduce headcounts through layoffs and attrition.

Inputs:

The Inventories Index entered contraction territory, indicating that companies have largely completed pulling forward materials to minimize the financial impacts of tariffs. The Supplier Deliveries Index indicated continued slowing of deliveries, reflecting ongoing delays at ports of entry. The Prices Index remained in expansion, driven by increases in steel and aluminum prices and the impact of tariffs.

Industry Performance:

Among the largest manufacturing industries, only Petroleum & Coal Products and Machinery expanded in May. Several industries reported contraction, including Paper Products, Wood Products, and Transportation Equipment.

Impact of Tariffs:

Several respondents cited tariffs as a major factor impacting business conditions. Tariffs are causing supply chain disruptions, increasing prices, and creating uncertainty for international orders.

It generally indicates an expansion of the overall economy.

Tariffs, market volatility, and economic uncertainty are the primary challenges.

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