ISM: U.S. Manufacturing Activity Strengthens

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Written by Danny Levin, Deputy Editor for IIR News Intelligence (Sugar Land, Texas)

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Summary

The Institute of Supply Management's (ISM) Manufacturing Purchasing Managers Index, an indicator for the level of economic activity in U.S. manufacturing, reached its highest level since May 2022. Industrial Info Resources is tracking $606 billion worth of projects under construction in the U.S. Industrial Manufacturing Industry, with more than half of the investment attributed to data centers and semiconductors.

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U.S. Manufacturing PMI Reaches Heights

According to the Institute of Supply Management's (ISM) Purchasing Managers Index (PMI) survey, U.S. manufacturing activity expanded for the fifth consecutive month in May and reached its highest level since May 2022.

The PMI, which tracks 18 manufacturing sectors in the U.S., registered 54% in May, up from 52.7% in both April and March--showing faster growth month-over-month. Any reading over 50% indicates expansion in the manufacturing economy.

According to Industrial Info Resources data, there are $606 billion worth of projects under construction in the U.S. Industrial Manufacturing Industry, with more than half of the investment attributed to data centers and semiconductors. The Global Market Intelligence (GMI) Project Database offers a full list of projects.

Any reading under 50% indicates contraction in the manufacturing economy.

"Not only are we in the fifth month of expansion, but the indices are all going in the right direction," Susan Spence, chair of ISM's Manufacturing Business Survey Committee, said during a news media call on Monday.

Spence said the New Orders index indicated faster growth compared to April; the Supplier Deliveries index stayed the same; the Production Index grew at a faster rate; and the Employment and Inventories indexes remained in contraction, although both improved.

Another sign of strength, the Industrial Info Resources North American Industrial Project Spending Index for the industry shows project spending in April (the latest data available) was $820 billion--up 129% from $357 billion in April 2025. IIR Senior Vice President of Research for Industrial Manufacturing David Pickering has said growth in the industry's project spending year-over-year is largely attributed to the buildout of data centers.

Middle East Conflict Stifles Manufacturing Activity

"Companies are still holding back because of uncertainty, but they're holding back less," Spence said during the call.

"In May, 25% of the comments were positive and 69% negative, with a 1-to-2.7 ratio of positive to negative sentiment," she said in the report summary of findings. "Among comments, the Iran war was mentioned in 42% and tariffs in 18%; 57% of the panelists mentioned pricing volatility as an issue for their companies."

May's Prices Index, an indicator of input and raw materials costs, remained in expansion ("increasing") territory, although it dipped slightly month-over-month. The elevated index, she said, is due to increases in steel and aluminum prices impacting the entire value chain; tariffs applied to many imported goods; and increases to petroleum-based products as a result of the recent Middle East conflict.

On the media call, she said the war in Iran is the main factor holding back U.S. manufacturing activity. "Things are looking good for now," she said. "But if we could see an end to this war, we could really take off."

Many survey respondents echoed that sentiment.

One from the Transportation Equipment sector said the Middle East conflict is "starting to directly and negatively impact cost of supply chain." Others cited shipment delays, the high price of fuel and its lack of availability, and overall market uncertainty.

Although the U.S. Supreme Court earlier this year rejected Trump's tariffs issued under the International Emergency Economic Powers Act, other tariffs remain in force. This includes those under Section 232 on a wide range of products, including imported steel and aluminum.

Key Takeaways

• The ISM's PMI survey indicates economic activity in U.S. manufacturing has reached a level not seen since May 2022.
• Three of four demand indicators show expansion.
• The Middle East conflict is the main factor holding back further activity.
• U.S. manufacturing construction remains robust, according to Industrial Info Resources data, especially for data centers and semiconductors.

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About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, Industrial Info Resources is tracking over 250,000 current and future projects worth $30.2 trillion (USD).