The US manufacturing sector continued to experience contraction in May, as economic activity remained sluggish, according to the latest report from the Institute for Supply Management (ISM). The ISM’s Manufacturing Purchasing Managers’ Index (PMI) registered a reading of 48.5, slightly down from April’s 48.7. This indicates a continued contraction in the manufacturing sector, which has been in decline for much of the past two years.
Declining Imports and the Impact of Tariffs
One of the most significant developments in the ISM report was the sharp drop in imports, which fell to their lowest level since 2009. The Import Index plummeted to 39.9, down from 47.1 in April. This decrease is largely attributed to President Donald Trump’s tariffs, which have raised the cost of importing goods from several countries. While some tariff hikes have been rolled back, many remain in place, continuing to affect the manufacturing sector.
ISM Chair Comments on Tariff Impact
Susan Spence, chair of the ISM Manufacturing Business Survey Committee, highlighted that tariffs were the most significant concern among panelists. In an interview with Yahoo Finance, Spence noted that 86% of respondents mentioned tariffs in their comments, with some drawing comparisons to the challenges faced during the 2020 pandemic. Spence emphasized that the key to improving the situation would be establishing certainty regarding trade policies and resolving issues with individual countries.
Mixed Signals from S&P Global Manufacturing Index
A separate report from S&P Global painted a more optimistic picture, showing a manufacturing PMI reading of 52, up from 50.2 in the previous month. However, Chris Williamson, chief business economist at S&P Global, cautioned that this headline growth masked underlying concerns in the sector. Despite a rise in new orders and increased supplier activity, Williamson noted that the surge in demand was largely driven by manufacturers and customers worrying about supply issues and rising prices, indicating a temporary spike rather than sustainable growth.
Looking Ahead: The Road to Recovery
As the US manufacturing sector grapples with the challenges posed by tariffs and supply chain issues, the outlook remains uncertain. While temporary demand surges provide hope, the underlying challenges—especially those related to tariffs—will need to be addressed to ensure long-term growth and stability in the sector. Only time will tell whether the sector can recover fully or continue to face ongoing contraction in the months to come.
