US ISM Manufacturing Index (May 2026)

ISM confirms manufacturing sector in cyclical upswing

The rise in the ISM Manufacturing Index to a four-year high in May suggests that the sector continues to hold up well, probably because the boost to production from the AI buildout is offsetting the impacts to supply from the Iran War. Price pressures eased a touch but the prices paid index remains at a level that will concern the Fed.

The headline index rose to 54.0 from 52.7 in April, leaving it above 50 for the fifth consecutive month. The increase was driven by a 2.7 point rise in the new orders index to 56.8, as well as a 0.9 point rise in the production index to 54.3, with one respondent in the machinery sector noted that “we’ve seen increased demand that was unexpected”. That may reflect some firms trying to get ahead of potential supply chain issues from the Iran War, with the supplier delivery times index remaining at 60.6, its highest level since May 2022. Employment remained a weak spot. Although the sub-index rose 2.2 points to 48.6, it implies that manufacturing employment contracted in May.

Meanwhile, the prices paid index dropped back slightly to 82.1 from 84.6, likely on the back of slightly lower oil prices. Nonetheless, in the commentary, many firms continued to point out the impact that higher oil prices were having on production costs. Moreover, there was also mention of higher costs of electronic components linked to the AI data centre buildout, which suggests that the strength in price pressures is more broad-based, while the Fed is likely to be particularly concerned by the responses suggesting that those higher prices are now more meaningfully affecting companies outside of the tech sector itself.