US manufacturing activity accelerated in May, with ISM Manufacturing PMI rising from 52.7 to 54.0, well above expectations of 52.6 and marking its highest level since May 2022. The report points to a broadening recovery across the sector, with only 2% of manufacturing GDP now in contraction, down dramatically from 19% in April. Historically, a PMI reading of 54.0 is consistent with annualized real GDP growth of roughly 2.2%, suggesting the broader economy continues to expand at a healthy pace.
The details of the report were equally encouraging. New orders jumped from 54.1 to 56.8, signaling stronger demand and indicating production pipelines should remain well supported in the months ahead. Production itself rose from 53.4 to 54.3, while the employment index improved from 46.4 to 48.6. Although hiring remains slightly below the expansion threshold, the improvement suggests manufacturers are becoming more confident about future activity.
Perhaps most importantly for markets, the prices paid index eased from 84.6 to 82.1. While still elevated, the decline offers some reassurance that cost pressures are not accelerating further despite ongoing concerns about energy prices and Middle East supply disruptions.
| Indicator | Previous | Latest |
|---|---|---|
| ISM Manufacturing PMI | 52.7 | 54.0 |
| New Orders | 54.1 | 56.8 |
| Production | 53.4 | 54.3 |
| Employment | 46.4 | 48.6 |
| Prices Paid | 84.6 | 82.1 |
| Manufacturing GDP in Contraction | 19% | 2% |
| Manufacturing GDP in Strong Contraction (PMI ≤45) | 2% | 2% |
| GDP Equivalent Signal | 2.2% annualized |
