US manufacturing activity accelerated to its strongest level in four years in May, as manufacturers increased production and built inventories in response to rising costs, supply chain disruption and growing geopolitical uncertainty.
According to the latest S&P Global US Manufacturing PMI, the headline index rose to 55.1 in May, up from 54.5 in April and the highest reading since May 2022. The figure marks the tenth consecutive month that the index has remained above the 50-point threshold that separates growth from contraction.
The improvement was driven by a sharp rise in production, which expanded at the fastest rate since April 2022, alongside continued growth in new orders. However, S&P Global cautioned that much of the recent strength appears to be linked to stockpiling activity as businesses seek to protect themselves against further price increases and potential supply shortages.
Manufacturers reported increasing inventories of both inputs and finished goods during the month, with many citing concerns over supply chain reliability and escalating costs linked to the ongoing conflict in the Middle East. The closure of key shipping routes and rising energy prices have added fresh pressure to global supply networks, prompting companies to bring forward purchasing decisions and build safety stocks.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said the headline figures masked underlying concerns about the sector’s longer-term health.
“At first glance, the manufacturing sector seems to be firing on all cylinders but lift the hood and the picture is not so clear.
“The headline PMI has hit a four-year high, with strong factory production growth for a second successive month in response to a further marked upturn in order books, 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.”
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.
The survey also highlighted mounting inflationary pressures across the sector. Input costs increased at the fastest pace since July 2022, driven by higher fuel, energy and raw material prices. In response, manufacturers raised their own selling prices at the quickest rate since September 2022 as they attempted to pass increased costs on to customers.
At the same time, supplier performance deteriorated sharply. Vendor delivery times lengthened to the greatest extent since August 2022, reflecting both supply shortages and increased purchasing activity as firms competed for available materials. Purchasing activity rose strongly, while input inventories expanded at the fastest pace in a year.
Despite stronger domestic demand, exports remained a weak spot. Overseas sales declined for the eleventh consecutive month, with manufacturers citing geopolitical instability and tariffs as key factors weighing on international demand.
The sector also continued to add jobs, with employment increasing at the fastest rate in five months. While hiring growth remained modest, manufacturers generally reported confidence that output and sales would rise over the coming year, supported by new product launches and expectations of broader economic improvement. Nevertheless, business optimism softened to a four-month low as concerns over inflation and geopolitical developments persisted.
Williamson warned that the current surge in activity may prove temporary if inventory building begins to unwind.
“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,” he said.
For manufacturers, the latest survey paints a mixed picture: strong production growth and improving order books are supporting activity in the short term, but escalating costs, supply chain disruption and weakening export demand continue to present significant challenges for the months ahead.
