US manufacturing contracts for third month amid worsening tariff uncertainty
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The news: US manufacturing activity contracted for a third consecutive month in May, with the ISM index falling to 48.5, its lowest since November, Institute for Supply Management data shows.
The context: Readings below 50 indicate contraction. The move was driven by the uneven rollout and changes in tariffs, which caused uncertainty and made it difficult for supply managers to source goods and materials. This also led to extended delivery times, bottlenecks, and disruptions in supply chains.
“In our survey, 86% of the general comments from our panellist were about the tariffs. It was 82% last month. It just continues to grow. It’s not gotten any better, the uncertainty is even worse,” Susan Spence, chair of the ISM Manufacturing Business Survey Committee told Bloomberg.
The numbers: The ISM’s import measure dropped to a 16-year low of 39.9, while the export measure hit its lowest level in five years, possibly reflecting retaliatory tariffs from other nations.
New orders contracted for the fourth consecutive month.
Seven industries reported contraction, including paper products and wood, while seven industries expanded, such as plastics, rubber and petroleum. The ISM factory inventories index saw its largest contraction in four months, and customer stockpiles fell to their lowest since March 2024.
Delivery times also lengthened, with the ISM supplier deliveries index rising to 56.1, while manufacturing employment nudged up to 46.8 from 46.5. Prices paid by manufacturers stayed high at 69.4, with supply chain disruptions and “tariff whiplash” cited by survey respondents.
What they said: “We still feel that the economy overall over a longer period of time is still in expansion,” Spence told reporters on a call. “We are really hopeful that the tariff uncertainties can come to a conclusion, and that the purchasing managers that are working so hard to deal with this whiplash can focus on the normalness of what their job should be.”
The sources: Institute for Supply Management, Bloomberg
