General

In May, the U.S. manufacturing sector contracted for the third consecutive month and at a slightly faster pace than the prior month, with the ISM Manufacturing^® PMI decreasing to 48.5% from 48.7% in April. Customer demand and output slowed, while inputs started to weaken. The New Orders and Production Indexes continued to contract but at a slower pace, rising to 47.6% and 45.4%, respectively. Meanwhile, the New Export Orders and Imports Indexes contracted at a faster pace, plummeting to 40.1% and 39.9%, respectively. As anticipated, inventories (46.7%) contracted after growing in April, as companies completed pull-forward deliveries ahead of increased tariffs.

The New Orders Index contracted for the fourth consecutive month but at a slightly slower pace than the prior month, a 0.4 percentage point rise from April. The index hasn’t shown consistent growth since a 24-month streak of expansion ended in May 2022. Of the six largest manufacturing sectors, two—petroleum and coal products; and machinery—reported an increase in new orders. Respondents noted weakening demand, with a lack of new orders from overseas customers being a key factor.

The New Export Orders Index contracted for a third consecutive month and at the fastest pace since the pandemic to 40.1%, 3.0 percentage points lower than April. The sharp contraction was due to the combination of slower global growth as well as the application of retaliatory tariffs applied to a variety of U.S.-manufactured products. Meanwhile, the Imports Index contracted for a second consecutive month, plunging 7.2 percentage points to 39.9% in May. Imports continue to contract as tariff pricing results in lower demand compared to prior months.

The Employment Index contracted for the fourth consecutive month but at a slower pace than the prior month, a 0.3 percentage point bump from April. Of the six-largest manufacturing sectors, only one—petroleum and coal products—reported increased employment. Companies continued to reduce headcounts through layoffs, attrition and hiring freezes, while opting for layoffs at an accelerating pace due to uncertainty around future demand.

The Prices Index fell 0.4 percentage points to 69.4%, indicating raw materials prices increased for the eighth straight month in May, driven by the dramatic rise in steel and aluminum prices impacting the entire supply chain, as well as the broad 10% tariff applied to imported goods. Forty-five percent of companies reported paying higher prices, down slightly from 49% in April but still up dramatically from 21% in January.

Manufacturing employment dipped slightly in May, losing 8,000 jobs on a seasonally adjusted basis, according to the monthly employment report from the Bureau of Labor Statistics. Nonfarm payrolls overall added 139,000 jobs last month.

The details: “The unemployment rate held at 4.2% in May and has remained in a narrow range of 4.0% to 4.2% since May 2024.”

• Meanwhile, nonfarm payrolls have averaged a monthly gain of 149,000 over the past 12 months, in line with the reading from May.

In manufacturing: “In manufacturing, the average workweek was little changed at 40.1
hours, and overtime was unchanged at 2.9 hours.”

• Meanwhile, average hourly earnings in manufacturing crept up from $35.11 in April to $35.28 in May on a seasonally adjusted basis.

The long view: Manufacturing employment has declined over the past year to date, yet remains above pre-pandemic levels, with 12,761,000 workers in May. The sector averaged 12,648,000 employees pre-pandemic (2017–2019).

The NAM says: “In order to support manufacturing growth and job creation in the U.S., manufacturers are calling on Congress to pass the One Big Beautiful Bill Act swiftly and make pro-manufacturing tax policies permanent,” said NAM Managing Vice President of Policy Charles Crain.

The artificial intelligence–driven rise in energy demand from the tech sector is adding more strain to the U.S. power grid, boosting the risk of outages to “new highs,” regional power market executives said at a regulatory conference this week (POLITICO Pro’s ENERGYWIRE, subscription).

What’s going on: “Grid rules developed during periods of relatively slow growth aren’t equipped for the demands of Silicon Valley’s investment in artificial intelligence, extreme weather shocks and deep national and state political divisions over energy and climate policy, grid operators told members of the Federal Energy Regulatory Commission.”

• PJM Interconnection, which has 67 million customers in the eastern U.S., forecasts a 32-gigawatt power demand increase through 2030, “of which 30 is from data centers,” CEO Manu Asthana told FERC.
• Southwest Power Pool, with approximately 19 million customers in the Great Plains states, said it projects peak demand “to be as much as 75% higher 10 years from now,” largely due to data centers and electrification.

Why the outage threat is worsening: Extreme weather events and greater use of weather-dependent energy sources such as wind and solar make “outages … 125 times more likely to happen [now] than eight years ago.”

What’s needed: C-suite leadership told regulators there are steps that can—and must—be taken to mitigate the worsening risk. These include:

• Stabilized market rules and “find[ing] that intersection between reliability and affordability that works both for consumers and suppliers, and that intersection is getting harder and harder to find”;
• “[M]uch deeper insight” into future electricity supply and demand and probabilities of extreme weather;
• More and better real-time information about the effect of dangerous storms on gas pipeline deliveries to electric turbines;
• “[S]tronger modeling of fuel and capacity performance to assess reliability risk”; and
• The establishment of an agreed-upon profile of the risks operators likely face.

Adding to the problem: Making matters worse are the vastly different climate policies between states, which put regional power markets “in an impossible position,” FERC Chair Mark Christie said at the conference.

• One possible solution: give states more responsibility for fixing grid reliability problems on their own.

The NAM says: As the NAM recently told the House’s AI and Energy Working Group, led by Rep. Julie Fedorchak (R-ND), “A reliable, resilient modern grid is required to enable the historic growth in data centers, which in turn can contribute to manufacturing growth.”

Washington, D.C. – The National Association of Manufacturers today unveiled the U.S. Manufacturing Investment Accelerator Program, a programmatic proposal designed to help manufacturers deliver on President Trump’s vision of America as a global manufacturing powerhouse.

“President Trump’s administration is prioritizing policies that spur more investment and innovation in manufacturing in the U.S.—a goal that manufacturers share. As the administration pursues reciprocal trade deals, the NAM is seeking zero-for-zero tariff outcomes with our top export markets,” said NAM President and CEO Jay Timmons. “As these deals materialize, manufacturers need a runway of predictable access to the critical inputs necessary to make things in America, empowering them to invest, create jobs, grow and compete. The U.S. Manufacturing Investment Accelerator Program is a manufacturing ‘speed pass’ that will unlock long-term investments needed to maintain America’s edge in the global economy.”

Why the program is needed right now: Even if the manufacturing industry were operating at full capacity—every machine turned on, every job filled—then the industry could produce only 84% of the inputs necessary to meet demand. That means that at least 16% of manufacturing inputs must be imported to grow domestic manufacturing.

Tariffs on critical manufacturing inputs dramatically increase the cost of these must-use, must-import inputs, thus hindering the very investment needed to grow manufacturing jobs in the U.S. These inputs are raw materials, critical minerals and energy resources—as well as some equipment and machinery our industry needs to install on the shop floor to enable U.S. production.

Timmons added, “The U.S. Manufacturing Investment Accelerator Program offers a way to bring in essential inputs that aren’t produced in the U.S. without added cost burdens—and it rewards manufacturers that expand production, invest in new equipment and create jobs here at home. Every dollar of imported manufacturing inputs has a multiplier effect, generating $1.40 on average in manufacturing output in the U.S. This proposal is a practical, pro-growth approach that supports President Trump’s trade priorities and turns his goal to strengthen manufacturing in America for the long term into reality.”

Background on the U.S. Manufacturing Investment Accelerator Program:

1. A Manufacturing Speed Pass

• To reduce the cost burdens that hinder domestic manufacturing investment, the administration should utilize existing authorities to issue general licenses—effectively a manufacturing speed pass—that allow manufacturers to import essential inputs duty-free.
• This includes raw materials, machinery, components and R&D inputs not readily available domestically.
• Eligible manufacturers would self-certify under defined criteria and be subject to post-entry verification by U.S. Customs and Border Protection.
• The Treasury Department, which has experience with general licensing frameworks, would be tasked with implementation.

1. Manufacturing Investment Accelerator Rebates
   The administration should provide a rebate to offset tariff costs incurred on must-import inputs when manufacturers are investing or expanding manufacturing in the U.S. Rebates would apply to:

• New or expanded manufacturing facilities;
• Technological upgrades and equipment modernization;
• Hiring of full-time manufacturing employees; and
• Domestic R&D expenditures.

Additionally, to ensure the program remains responsive and effective in generating manufacturing expansion in the U.S., the NAM recommends convening a Quarterly Manufacturing Dialogue between manufacturers and key federal agencies, including U.S. Treasury, the Office of the U.S. Trade Representative, the Department of Commerce and the Small Business Administration, among others.This ongoing forum would allow for real-time feedback, operational updates and continuous improvement of the Accelerator Program to better serve manufacturers in America.

The NAM also today unveiled a first-of-its-kind new data analysis visualized in a trade map, offering a state-by-state look at the increase in tariff costs borne by manufacturers and the need for globally sourced critical inputs necessary to make things in America—such as raw materials, critical minerals and energy sources.

The NAM’s Q2 2025 Manufacturers’ Outlook Survey showed manufacturers’ optimism has dropped to 55.4%, the lowest level since the height of the COVID-19 pandemic in Q2 2020. Trade uncertainty remained the top business concern for the second consecutive quarter, cited by 77.0% of respondents.

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs nearly 13 million men and women, contributes $2.93 trillion to the U.S. economy annually and accounts for 53% of private-sector rese arch and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

In March, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index recorded a 3.4% annual gain, down slightly from 4.0% in February. The 10-City Composite saw an annual increase of 4.8% in March, down from 5.2% the previous month, while the 20-City Composite rose 4.1% year-over-year, down from 4.5%. Among the 20 cities, New York again posted the highest annual gain at 8.0%, followed by Chicago at 6.5% and Cleveland at 5.9%. Tampa again exhibited the lowest annual return, with prices falling 2.2%.

On a month-over-month basis, the U.S. National Index rose 0.8%, the 10-City Composite improved 1.2% and the 20-City Composite increased 1.1% before seasonal adjustment. Meanwhile, after seasonal adjustment, the National Index and the 20-City Composite posted decreases of 0.3% and 0.1%, respectively, while the 10-City Composite improved 0.01%. Of the cities tracked by the 20-City Composite Index, 18 showed monthly price growth, signaling that price increases were broad-based across the country. Cleveland (+1.8%), Seattle (+1.8%) and New York (+1.5%) led monthly price gains, while only Tampa (-0.3%) and Miami (-0.2%) exhibited monthly declines.

While affordability continues to be severely constrained, it did not worsen considerably since borrowing costs have stabilized. Mortgage rates continue to hover in the mid-6% range and monthly payment burdens are near multi-decade highs relative to incomes. Nevertheless, weaker buyer demand counteracted persistent supply shortages due to many existing homeowners reluctant to part with low pandemic-era mortgage rates and limited construction activity. March’s upswing in prices underscores both homeowners’ retention of equity and the housing market’s sensitivity to mortgage rates and affordability constraints.

Consumer confidence increased 12.3 points in May to 98.0. The Consumer Confidence Index rose for the first time after falling for five consecutive months. A rebound was apparent in the responses before the May 12 announcement that paused some tariffs on imports from China, but that rebound gained momentum afterward. The improvement was driven largely by consumer expectations with all three components of the Expectations Index—business conditions, employment prospects and future income—increasing from April lows.

The Present Situation Index, reflecting current business and labor market conditions, rose 4.8 points to 135.9. Meanwhile, the Expectations Index, which reflects consumers’ short-term outlook for income, business and labor market conditions, jumped 17.4 points to 72.8, but remained below the recession signal threshold of 80.

All components of the Consumer Confidence Index improved, signaling that consumers are less pessimistic and have regained some optimism about future income prospects. On the other hand, views of the current labor market situation are still poor, with 31.8% of consumers saying jobs were “plentiful,” up slightly from April (31.2%), while 18.6% said jobs were “hard to get,” up from 17.5%. Looking to the future, 26.6% anticipate there will be fewer available jobs in the next six months, down from 32.4% the prior month. Additionally, expectations about future income returned to positive territory, with 18.0% of respondents anticipating increases compared to 13.8% expecting decreases.

May’s recovery in confidence was broad-based across age and income groups, with the strongest improvement among Republicans. Inflation expectations likewise edged down to 6.5% in May but remain elevated, with inflation and high prices remaining a top concern for consumers. Mentions of trade and tariffs were still prevalent in written responses, with consumers expressing fears of increasing prices, but there were also some mentions of easing inflation and lower gas prices.

Buying plans for homes and cars improved materially, particularly after the May 12 tariff announcement. Plans to buy big-ticket items were also up. Meanwhile, expectations for higher interest rates were unchanged. Consumers’ views of their current financial situation improved from April, when it reached the lowest level since 2022. Nonetheless, consumers were more worried about not being able to buy things they need or want than they were about losing their jobs.

Special questions in May focused on if consumers had changed their spending habits or financial behavior recently. More than one-third (36.7%) said they had saved money for future spending, and 26.0% postponed major purchases. On the flip side, 26.6% said they dipped into savings for goods and services. There were sizable differences between income groups, with households making more than $125,000 more likely to save while those under that threshold were more likely to dig into savings or postpone purchases. Higher income groups were also more likely to make advanced purchases ahead of tariff price increases.

Manufacturing activity in the Fifth District contracted in May, but at a slower pace than the previous month, with the composite manufacturing index rising from -13 to -9. Nonetheless, the local business conditions index deteriorated further, falling from -21 in April to -25 in May. On the other hand, manufacturers are less pessimistic about the future, with the outlook for future local business conditions rising from -37 in April to -6. The Fifth Federal Reserve District consists of Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia.

Among its components, shipments and new orders improved but remained negative, rising from -17 to -10 and from -15 to -14, respectively. Employment edged up from -5 to -2, indicating hiring decreased at a slower rate in May. The vendor lead time index jumped from 1 to 15 in May, while the share of firms reporting backlogs rose from -24 to -19. The average growth rates of prices paid and received were little changed.

Looking ahead, firms still expect both price indexes to rise in the next 12 months but at a slower pace than forecasted in April. Expectations for future shipments rebounded from -20 to 2, turning positive, while new orders improved notably but remained negative at -3, suggesting that firms anticipate business to decline marginally in the next six months. Expectations for backlogs were largely the same, moving from -30 to -27. Meanwhile, firms continued a cautious approach to equipment and software spending, with expectations improving slightly to -13. Expectations for spending on capital expenditures remained the same at -15. In sum, businesses in the Fifth District are hesitant about the prospects for future growth and making new investments but are less sour on current conditions compared to April.

In May, Texas factory activity held steady, following slight growth in April. The production index fell four points to 0.9, indicating relatively flat output growth. The new orders index remained negative but improved, rising to -8.7 from -20.0 in April. The capacity utilization index also rose but remained negative, up 2.3 points to -1.5, while the shipments index turned positive, increasing six points to 0.5.

Perceptions of manufacturing business conditions continued to worsen in May but at a slower rate of decline than the prior month, with the general business activity index rising more than 20 points to -15.3. The company outlook index also improved while remaining negative, increasing to -11.3 from -28.3. Meanwhile, the outlook uncertainty index, which has been volatile in recent months, retreated in May, falling more than 34 points to 12.7. The series average is 17.3.

Labor market indicators suggested a slight increase in head counts and shorter workweeks in May, with the employment index back in positive territory at 3.5, while the hours worked index remained negative at -3.6. More than 11% of firms reported net hiring, while a smaller percentage (8.0%) noted net layoffs.

Historically high upward pressure on prices persisted in May, while wage growth remained relatively stable. The prices paid for raw materials index softened slightly, falling from 48.4 to 40.7. Meanwhile, the prices paid for finished goods index was largely unchanged, rising just 0.2 points. Both price indexes are roughly double their series averages. Meanwhile, the wages and benefits index is below the series average of 21.1, increasing 0.7 points to 15.0 in May.

The outlook for future manufacturing activity improved from April, with the future production index increasing from 14.8 to 31.1. Meanwhile, the future general business activity index and the future company outlook index both turned positive, rising 16.5 points and 11.6 points to 1.3 and 5.6, respectively. Other indicators also rose but remained below average.

The first brand-new U.S. liquefied natural gas export facility to advance under the new administration has gotten the final financial green light (Reuters, subscription).

What’s going on: “Australia’s Woodside Energy gave final approval to build a $17.5 billion liquefied natural gas project in Louisiana.”

•  The project—estimated to begin delivering gas in 2029—will be the largest single from-scratch investment in Louisiana to date, as well as the largest single foreign direct investment in the state’s history, according to Louisiana Economic Development.

What the project has: The Woodside LNG endeavor is “in a foreign trade zone, which gives it relief on some customs duties.”

• The construction will use mostly U.S.-based contractors, services and workers, and about half of the materials and equipment will be sourced domestically.

What it means: The project, which has an estimated lifespan of 40 years once operational, will help Woodside “produce around 24 million tonnes per annum from its worldwide LNG portfolio in the next decade, making up over 5% of global supply, to service demand in Europe and Asia.”

The NAM says: “Tremendous news from [Woodside Energy],” NAM President and CEO Jay Timmons wrote following the announcement. “Growing LNG production is vital for fostering job creation, incentivizing investment and driving America’s economy forward.”

The NAM’s record: The NAM has long urged policymakers to supercharge the nation’s LNG export capacity. In 2024, it released a joint study with EY that found the LNG export industry’s total fiscal support of federal, state and local governments was $11 billion in 2023 alone.

• The study also found that the sector, which has created tens of thousands of jobs, could support more than 900,000 additional positions and add $216 billion to U.S. gross domestic product by 2044.
• Last December, the NAM made recommendations to Trump’s transition team, advocating the removal of the Biden export ban, a move that Trump made on his first day.
• In April, the NAM recommended to 10 federal agencies that 44 regulations should be revised or rescinded. Among those proposals was the recommendation that the Department of Energy issue a new study on LNG exports.

  The Manufacturing Leadership Council, the NAM’s digital transformation division, has announced its list of finalists for the Manufacturing Leadership Awards—an honor given to world-class manufacturing companies and leaders who are revolutionizing the industry’s digital capabilities.

The big reveal: All finalists will be celebrated at the ML Awards gala on June 18 in San Marco Island, Florida, where the winners will be announced.

• The awards given include the Future of Manufacturing Award, the Manufacturing Leader of the Year, the Small/Medium Enterprise Manufacturer of the Year and Large Enterprise Manufacturer of the Year.
• Manufacturers can also win awards in several categories, including artificial intelligence vision and strategy, business model transformation, collaborative ecosystems and more.
• Award nominations were judged by a distinguished group of manufacturing leaders from across the industry.
• You can see a complete list of finalists here.

Rethink: Ahead of the Awards gala, the MLC will be hosting Rethink, where manufacturing leaders gather to learn best practices and make connections. The star-studded lineup includes:

• A keynote address on digital transformation from Siemens USA President and CEO Barbara Humpton;
• A talk on “How Wall Street Views Digital Transformation in Manufacturing” by Goldman Sachs Managing Director, Technology, Media and Telecommunications Group Jack Anstey;
• An inside look at Hershey’s digital factory, featuring The Hershey Company Vice President of Manufacturing and Engineering and MLC Board of Governors member Will Bonifant; and
• Numerous case studies, best practice sessions, networking opportunities and more.

The last word: “In times of business uncertainty, manufacturers find that investments in digital technology can pay off for improving efficiency and overall performance and innovation,” said MLC Founder, Vice President and Executive Director David Brousell. “In our 21st season of recognizing excellence in Manufacturing 4.0, it is remarkable to witness the innovative methodologies that manufacturers are continually developing to propel their digital transformation initiatives.”

Join us: If you’d like to learn more about Rethink or register for the conference, go here.