Economic Data and Growth

Business activity in the U.S. manufacturing sector declined for the third consecutive month in May—and at a slightly faster pace than in April (Institute for Supply Management).

What’s going on: The ISM Manufacturing Purchasing Managers Index edged down to 48.5 from 48.7 in April, reflecting continued weakness in demand and output.

• The New Orders Index rose slightly to 47.6 but remained in contraction for the fourth straight month. Only two of the six largest manufacturing sectors—petroleum and coal products and machinery—reported increased new orders.
• The Production Index ticked up to 45.4, still signaling contraction but at a slower pace.

Tariffs: The New Export Orders Index fell sharply to 40.1, the fastest pace of contraction since the COVID-19 pandemic, driven by slower global growth and new retaliatory tariffs on U.S.-manufactured goods.

• The Imports Index plunged to 39.9, as tariff-related price increases softened demand.

Jobs: The Employment Index rose modestly to 46.8 but remained in negative territory, suggesting continued job losses in manufacturing, though at a slower rate. Companies cited hiring freezes, layoffs and attrition amid uncertainty about future demand.

Prices: The Prices Index dipped slightly to 69.4, but remained elevated as steel, aluminum and other tariffed imports drove raw materials costs higher.

Inventories: Inventories fell back into contraction, dropping to 46.7 after a brief expansion in April, as firms stopped pulling forward deliveries and worked through earlier stockpiles built up ahead of tariff hikes.