U.S. Manufacturing Grows for Fifth Straight Month, Longest Streak Since 2022
0h ago|4 min readStandard
Fazen Markets Editorial Desk
Collective editorial team · methodology
manufacturingISM-PMI
Fazen Markets Editorial Desk
Collective editorial team · methodology
Trades XAUUSD 24/5 on autopilot. Verified Myfxbook performance. Free forever.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The majority of retail investor accounts lose money when trading CFDs. Vortex HFT is informational software — not investment advice. Past performance does not guarantee future results.
American manufacturers grew in May for the fifth consecutive month, marking the sector's longest expansionary streak since 2022. MarketWatch reported on June 1, 2026, that the Institute for Supply Management's Purchasing Managers' Index remained in expansion territory at 50.9. The reading, though above the 50.0 contraction threshold, reflects a slowdown from April's 51.6 and underscores a persistent gap between output growth and business leader confidence.
The current expansion echoes the prolonged growth period from March to August 2022, when the ISM PMI averaged 52.8. That streak ended as the Federal Reserve's aggressive hiking cycle, which raised the federal funds rate from near zero to 4.50%, began to bite. The present backdrop differs, with the Fed Funds rate holding steady at 4.75% after a pause that began in late 2025. Core PCE inflation, the Fed's preferred gauge, recently ticked up to 2.8% year-over-year.
The primary catalyst for current anxiety is the reactivation of Section 301 tariffs on Chinese goods by the Trump administration, which took effect on March 1, 2026. This policy shift, combined with sustained military engagements in the Middle East following the 2025 Iran conflict, has triggered a supply-side inflation pulse. These dual forces are pressuring input costs and clouding the forward-looking demand picture for capital goods producers.
The May ISM PMI reading of 50.9 represents a 0.7-point decline from April. The index has now averaged 51.2 over the five-month expansion. The New Orders Index, a leading indicator, fell more sharply to 51.0 from 52.8. The Prices Paid Index, a measure of input cost inflation, jumped 3.2 points to 58.5, its highest level in nine months.
| Metric | May 2026 | April 2026 | Change |
|---|---|---|---|
| ISM PMI | 50.9 | 51.6 | -0.7 |
| New Orders | 51.0 | 52.8 | -1.8 |
| Prices Paid | 58.5 | 55.3 | +3.2 |
| Employment | 49.1 | 49.8 | -0.7 |
Sector performance diverged sharply. The S&P 500 Industrial Sector Index is up only 4.2% year-to-date, underperforming the broader S&P 500's 8.7% gain. Machinery stocks, sensitive to capital expenditure cycles, have been particularly weak, with the Industrial Select Sector SPDR Fund (XLI) showing net outflows of $1.2 billion over the past month.
The data signals a shift toward stagflationary pressures within manufacturing. Companies with heavy exposure to Chinese supply chains and tariff-affected goods, such as Caterpillar (CAT) and Deere & Co. (DE), face immediate margin compression. Their input costs are rising while order growth slows. Conversely, domestic-focused industrial conglomerates like Honeywell (HON) and automation providers like Rockwell Automation (ROK) may see relative benefit from reshoring trends, albeit within a slowing macro environment.
The core risk to this analysis is that resilient consumer demand could absorb higher prices, allowing manufacturers to pass through costs and sustain profitability. Current positioning data from CFTC futures shows asset managers have increased net short positions in 10-year Treasury futures, betting on higher yields, while commercial hedgers (often producers) hold a net long position, indicating a divide on the inflation outlook. Flow into inflation-protected securities like TIPS has accelerated, with the iShares TIPS Bond ETF (TIP) seeing $840 million in inflows over two weeks.
The June 17-18 FOMC meeting is the primary near-term catalyst. Markets will scrutinize the Fed's dot plot for any shift toward a more hawkish stance in response to the inflation pulse. The next ISM Manufacturing PMI, due July 1, will be critical for confirming whether the expansion is stalling. A break below 50.0 would signal contraction.
Key levels to monitor include the 10-year Treasury yield resistance at 4.50%. A sustained breach could accelerate cost pressures. For the S&P 500 Industrial Sector, the 970-980 level acts as crucial support; a breakdown could trigger a re-rating of cyclical earnings multiples. Monitor the U.S. Dollar Index (DXY); continued strength above 105.00 would further pressure exporters' competitiveness.
The ISM Purchasing Managers' Index is a leading economic indicator derived from a monthly survey of supply chain executives. A reading above 50.0 signals expansion in the manufacturing sector, while below 50.0 indicates contraction. The index's subcomponents, like New Orders and Prices Paid, provide forward-looking insights into demand and cost inflation trends before they appear in quarterly earnings reports. It is a key input for GDP forecasts.
The reinstated tariffs directly increase the cost of imported components and finished goods from China, which accounted for 18.2% of U.S. goods imports in 2025. Manufacturers must either absorb these costs, eroding margins, or pass them to consumers, risking demand destruction. The uncertainty also disrupts long-term supply chain planning, causing firms to delay capital investment decisions, which is reflected in the softer New Orders data seen in the May report.
No, employment in the sector has lagged. The ISM Employment Index has been in contraction territory for three of the past five months, registering 49.1 in May. This disconnect between output growth and hiring suggests firms are meeting increased demand through productivity gains, automation, and longer working hours rather than headcount expansion. It reflects caution about the sustainability of the current demand cycle amid policy uncertainties.
Manufacturing's five-month expansion is losing momentum under the weight of resurgent input costs and policy-driven demand uncertainty.
Vortex HFT is our free MT4/MT5 Expert Advisor. Verified Myfxbook performance. No subscription. No fees. Trades 24/5.
Position yourself for the macro moves discussed above
Start TradingSponsored
Open a demo account in 30 seconds. No deposit required.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.