US manufacturing's headline strength masks a fragile near-term outlook, with growth expected to slow once current stockpiling runs its course and inflation pressures intensify, S&P Global said in a report on Monday.
PMI Hits Four-Year High
The seasonally adjusted S&P Global US Manufacturing Purchasing Managers' Index (PMI) rose to 55.1 in May from 54.5 in April, marking the highest reading since May 2022 and the 10th consecutive month above the 50 threshold that indicates expansion. The upturn was led by production, which grew at the sharpest pace since April 2022. New orders also increased markedly, though growth was softer than in April and largely driven by clients building inventory ahead of expected price hikes and delays. Exports fell for the 11th month in a row as geopolitical instability and tariffs weighed on foreign sales.
Stockpiling Distorts Underlying Health
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, noted: "The headline PMI has hit a four-year high, with strong factory production growth for a second successive month. But since the outbreak of war in the Middle East we have seen production and demand buoyed by stock building as companies worry over rising prices and supply difficulties. This stockpiling was again widely evident in May and makes it hard to take an accurate reading on the underlying health of the manufacturing economy, as growth will cool once this stock build has run its course."
Stock building showed up across the supply chain. Firms added to finished goods inventories for the second month running at the quickest pace since last November, while purchasing activity rose solidly to mitigate further price increases and disruption. Input stocks rose for the second successive month at the fastest rate since May 2025.
Inflation and Supply Chain Pressures
Price and supply pressures intensified. Manufacturing input costs rose at the fastest rate in nearly four years, driven by fuel and oil-related products, pushing the Input Prices index to its highest since July 2022. Supplier delivery times deteriorated to the greatest extent since August 2022, with the Strait of Hormuz closure adding to delays. Manufacturers passed costs on, raising output charges at the steepest rate since September 2022.
Williamson added that "the resulting steep jump in producer costs sends a worrying signal that broader economy inflation has further to rise in the coming months."
Employment and Confidence
Employment saw a modest uptick, the best in five months, as firms hired on expectations of higher sales over 12 months. However, confidence softened to a four-month low amid geopolitical concerns and higher inflation.
