Flash PMI Sets a New Cycle High as Supply Disruptions Drive Costs Higher
The S&P Global Flash U.S. Manufacturing PMI rose for the 10th consecutive month from 54.5 to 55.3 in May, a 48-month high. Factory production improved at its fastest rate since April 2022, while new orders growth slowed but marked its second-fastest pace of growth over the past four years. Meanwhile, export orders continue to decline amid the conflict in the Middle East.
Inventories increased in May as the stock of factory inputs rose at its fastest pace since April 2022. At the same time, supplier delivery times lengthened to the greatest extent since August 2022, with respondents reporting war-related shipping disruptions and stock piling exacerbating existing tariff-related supply constraints. Meanwhile, manufacturers’ input cost inflation jumped in part due to supply constraints and increased energy prices, and selling price inflation rose to its highest level since August 2022. Overall, price increases accelerated for manufacturers as well as the service industry.
Overall business activity stayed the same in May, remaining at 51.7 from April. Further, the growth rate in the services sector moderated, decreasing to a two-month low. Overall, new orders growth cooled but remained elevated as companies continue to build up safety stock. Employment fell overall as the rate of job losses reached its highest point since August 2024 due to concerns over rising costs and deteriorating demand.
On the other hand, manufacturers’ optimism about future business conditions continued to rise in May to the highest level since February 2025. The optimism reflected the recent upturn in orders as well as ongoing hopes of tariff-related reshoring. At the same time, service sector optimism fell over concerns of the demand outlook being affected by surging prices and higher uncertainty.