Production up, imports up, exports up, prices up, employment still contracting.
Please consider the May 2026 ISM® Manufacturing PMI® Report
The report was issued today by Susan Spence, MBA, Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee.
“The Manufacturing PMI® registered 54 percent in May, 1.3 percentage points higher than in April and its highest reading since May 2022 (55.9 percent). The overall economy continued in expansion for the 19th month in a row. (A Manufacturing PMI® above 47.5 percent, over a period of time, generally indicates an expansion of the overall economy.)
The New Orders Index expanded for the fifth consecutive month after four straight readings in contraction, registering 56.8 percent, up 2.7 percentage points compared to April’s figure of 54.1 percent. The May reading of the Production Index (54.3 percent) is 0.9 percentage point higher than April’s reading of 53.4 percent. The Prices Index remained in expansion (or ‘increasing’ territory), registering 82.1 percent, a 2.5-percentage point decrease from April’s reading of 84.6 percent. The Backlog of Orders Index registered 52.2 percent, up 0.8 percentage point compared to the 51.4 percent recorded in April. The Employment Index registered 48.6 percent, up 2.2 percentage points from April’s figure of 46.4 percent,” says Spence.
Key ISM Points
- New Orders Growing
- Production Growing
- Employment Contracting
- Supplier Deliveries Slowing
- Raw Materials Inventories Contracting; Customers’ Inventories Too Low
- Prices Increasing
- Imports Growing, Exports Growing
Respondent Comments (Emphasis Mine)
- “Impact of Iran conflict starting to directly and negatively impact cost of supply chain. Oil and related commodities are escalating in price.” [Transportation Equipment]
- “The Middle East conflict is triggering shipment delays and uncertainties. Elevated gas prices and inflation will surely impact our purchases. However, over the last quarter, we’ve seen increased demand that was unexpected.” [Machinery]
- “As with all companies, we have felt the effects of fuel-related inflation and general market uncertainty due to overall economic variability and geopolitical events that have impacted such markets as construction, automotive and agriculture, as well as the general industrial sector.” [Chemical Products]
- “Continuing trends of 15-percent sales increase in April, cost increases on a majority of raw materials, and fuel charges on many inbound and outbound deliveries. We remain cautiously optimistic that if global economic factors stabilize and the Iran conflict ends, we can continue with increased sales and maintain acceptable margins.” [Chemical Products]
- “Cost of diesel is having huge impacts on our profitability. Confusion abounds around tariff refunds. We purchase many imported goods but in most cases are not the importer of record, so it is currently unclear to what we may be entitled.” [Food, Beverage & Tobacco Products]
- “Prices continue to rise for many products — some due to increase in data center creation for electronic components, others as a result of the Iran war and reductions in availability of oil/petroleum.” [Computer & Electronic Products]
- “Supply constraints continue to propagate and are a key headwind to supporting increased aerospace and defense demand. Semiconductors, critical minerals and certain types of raw materials are illustrative examples of sales plans at risk. Corporate risk mitigation actions are underway to secure supply in the midst of constraints.” [Transportation Equipment]
- “The current atmosphere is one of extreme uncertainty and concern for the future in terms of both price stability and longer-term supply continuity related to the Iran conflict and Strait of Hormuz closure. We have a lot of negotiations in process related to requested price increases, some related to oil prices and some still fallout from the 2025 tariff/geopolitical climate.” [Miscellaneous Manufacturing]
- “Continued dynamic random-access memory (DRAM) volatility, increased gas prices and tariffs are causing long lead constraints and price hikes that customers are not willing to bear. Panic is starting within our industry.” [Electrical Equipment, Appliances & Components]
- “Business appears to be weakening — uncertainty surrounding the Iran war, rising energy prices and customers unwilling to commit to expenditures beyond a very short term.” [Fabricated Metal Products]
The top two concerns are prices and extreme uncertainty.
ISM Reported Input Prices
Prices Paid
- February: 45.4% Higher, 4.4% Lower
- March: 59.4% Higher, 2.8% Lower
- April: 70.3% Higher, 1.2% Lower
- May, 66.3% Higher, 2.2% Lower
Prices were accelerating higher even before the war in Iran.
ISM Reported Imports
Imports are growing slowly.
ISM New Export Orders
New export orders are barely growing. Imports are rising faster.
ISM Reported Employment
Net employment improved in May with 17 percent reporting increased headcount while only 15.4 percent reported reduced headcount.
However, the index level remains in contraction. The employment index has been negative for 32 consecutive months.
May ISM Synopsis
We have improved production levels. And new export orders flipped into positive territory.
However, employment is problematic, and the prices paid index is very problematic.
Manufacturers will pass on these price hikes.
Related Posts
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May 13, 2026: Producer Price Index PPI Surges 1.4 Percent in April, Fed Behind the Curve?
The PPI numbers exceeded the highest estimate of every economist surveyed.
May 28, 2026: PCE Inflation Spikes Again, Year-Over-Year Highest Since May 2023
Year-over-year PCE inflation jumped to 3.8 percent. The Fed wants 2.0 percent.
June 1, 2026: Exxon Warns of $150 Crude. Here are the Supporting Charts
Global observed crude levels are at record low levels. Implications are ominous.
Is it any wonder the ISM is reporting higher prices paid?
And our “ally” responds…
Israeli defence minister says operations in southern Lebanon will continueIsrael Katz has said military operations in southern Lebanon will continue under all circumstances.
The Israeli defence minister also said the military is studying the possibility of carrying out additional operations in Lebanon and suggested that attacks could be expanded depending on developments along the border.
and The Lowest Consumer Sentiment EVER
https://awealthofcommonsense.com/2026/05/the-lowest-consumer-sentiment-ever/
You wonder why. People are doing well but complaining. A lot of people became perma-angry during COVID and stayed there.
Some people are doing well. Some are in bad shape. Some people who are doing well have loved ones who are struggling mightily. I live in a leafy, middle-class neighborhood. Walking through my neighborhood, you would really feel like people are doing well. About a mile away is an older working-class neighborhood. Walking through that neighborhood, you would feel like the country is rapidly coming apart at the seams.
These consumer sentiment surveys don’t do a good job of telling us the conditions of the folks responding to the surveys.
At the same time that all the AI tomfoolery has been making PC components very expensive (particularly RAM and flash storage), Apple started an old-fashioned price war of sorts in the laptop segment. Dell and others are now racing for an “answer” to the quality+value MacBook Neo (which surely means lower margins per laptop sale, right?). The fact that Apple, of all corporations, felt the need to target the “value conscious” consumer in this manner is very telling to me.
Apple has an huge advantage over Dell. Dell has to buy CPUs from Intel and OS from Microsoft and pass that cost onto consumers. Apple makes their own CPUs and OS. Apple is content just making a profit off of the NEO.
Yes, but they could have made a “Neo” years ago, but chose the 50% margin over the 30% margin. That’s why it is curious to me that all of a sudden Apple feels the need to cater to the poors.
One of the things software manufacturers learned decades ago is that once most people take the time and effort to become proficient in a piece of software, they never want to have to learn how to use the competitions. It’s how Microsoft Office remains king at massive margins.
Early on, Apple got heavily into education sales, selling at very low margins to hopefully get young folks to become apple only fans. Once they graduated though, corporate America was Windows only and folks were forced to adapt.
This is just an area where Apple currently has a cost advantage and are trying to exploit it to increase mind-share. In a work from home world, it doesn’t really matter what OS or software you use, so its an opportunity for Apple. Get the next generation into Apple on the cheap, and when they’re making a little more money they will upgrade to the higher-margin stuff to cosplay their success.