May 2025 ISM Manufacturing PMI Report Summary

The Institute for Supply Management® (ISM®) reported that the Manufacturing PMI® for May 2025 declined slightly to 48.5%, compared to 48.7% in April.

This marks another month of contraction in U.S. manufacturing, although the broader economy continued to expand for the 61st consecutive month. A reading above 42.3% typically signals overall economic growth, suggesting that the current decline remains confined largely to the manufacturing sector.

Key Index Readings

• New Orders: Edged up to 47.6%, indicating a slightly slower pace of decline. However, this component has now contracted for four straight months.
• Production: Rose to 45.4%, showing some recovery from April but still firmly in contraction territory.
• Prices: Remained high at 69.4%, reflecting persistent cost pressures, especially from tariffs and supply shortages.
• Employment: Increased modestly to 46.8%, though still indicating workforce reductions as many firms continue with layoffs.
• Supplier Deliveries: Slowed further, rising to 56.1%, a sign of ongoing delays in supply chains.
• Inventories: Fell back into contraction at 46.7%, suggesting post-tariff restocking cycles may be ending.
• New Export Orders: Dropped to 40.1%, showing a notable weakening in external demand.
• Imports: Slipped sharply to 39.9%, highlighting a significant pullback in inbound goods, partly due to global trade uncertainties.

Commentary from Susan Spence, Chair of the ISM Manufacturing Business Survey Committee

Susan Spence noted that while demand remains weak, there are early signs of stabilization, especially in new orders and backlogs. However, export demand declined further, and customer inventories are still too low, which could encourage higher production in the near term.

Production continues to contract, but the decline has moderated compared to April. Employment remains soft, with layoffs persisting as companies avoid natural attrition. Inputs including inventories and imports softened further amid trade disruptions and post-tariff adjustments. Prices remain elevated, although the pace of increases has moderated.

Sector-Level Insights

• 57% of manufacturing GDP was in contraction during May, an increase from 41% in April, signaling a broader slowdown.
• The share of industries with a PMI reading at or below 45%—indicating significant weakness—fell to 5% of manufacturing GDP, down from 18% in April, suggesting the depth of contraction has eased.

Industries Reporting Expansion (7 total):

• Plastics & Rubber Products
• Nonmetallic Mineral Products
• Petroleum & Coal Products
• Furniture & Related Products
• Electrical Equipment, Appliances & Components
• Fabricated Metal Products
• Machinery

Industries Reporting Contraction (7 total):

• Paper Products
• Wood Products
• Printing & Related Support Activities
• Food, Beverage & Tobacco Products
• Transportation Equipment
• Chemical Products
• Primary Metals

In Short

The May 2025 ISM report reflects a broad but mixed picture for the U.S. manufacturing sector. While contraction persists, the pace has moderated in some areas, hinting that the worst of the downturn may be easing. Persistent challenges remain, particularly on the input side and in global trade, but modest improvements in orders and sector breadth offer some cautious optimism.

Source: ISM