A closely watched industry survey indicates that a prolonged U.S. manufacturing slump is giving way to a factory rebound, with the Institute for Supply Management's manufacturing PMI reaching 54 in May — its highest reading in four years. This marks the fifth consecutive month of expansion after nearly two years of contraction, according to data from the Institute for Supply Management and S&P Global.
White House economic officials are highlighting this data as evidence of recovery. The PMI reading was accompanied by strengthening in new orders, production, and backlogs. S&P Global's U.S. manufacturing PMI also climbed to a four-year high in May, while regional surveys from the Richmond and New York Federal Reserve districts showed stronger orders and shipments.
However, the broad improvement exists alongside miserable industry anecdotes about the Iran war's energy shock, tariffs, and supply chain chaos. The survey's positive headline masks deep disruptions that manufacturers are facing on the ground, suggesting the recovery is uneven and fragile.
While the data points to reduced recession risk, the underlying challenges means the sector is not out of the woods. One analyst noted, "The ISM manufacturing index at 54 is not the finish line. It is the..." — implying that further hurdles lie ahead, particularly from policy shocks and geopolitical tensions.
Counter-argument: The PMI's strength may be misleading, as the same survey's anecdotes and regional data indicate severe stress from energy prices and trade policy, potentially foreshadowing a reversal if geopolitical conditions worsen.