The U.S. manufacturing sector experienced growth in May, driven by a slight rebound in new orders, leading to increased production and employment, according to final data from the S&P Global purchasing managers' survey released on Monday. The seasonally adjusted S&P Global US Manufacturing Purchasing Managers' Index (PMI) climbed to 51.3 in May from the neutral level of 50.0 in April, surpassing the preliminary flash estimate of 50.9.
A PMI reading above 50 indicates growth in factory activity. This reading reflects a modest improvement in the health of the manufacturing sector, marking the fourth instance of growth in the past five months, as reported by S&P Global.
New export orders grew at their fastest pace in two years, outpacing the overall rise in total orders. This increase was driven by improving demand in Europe, as well as growth in new orders from Asia, Canada, and Mexico. Employment rose for the fifth consecutive month, achieving its sharpest increase since July 2023. This uptick can be attributed to positive expectations and the filling of previously vacant positions.
The survey also revealed that input cost inflation accelerated for the third consecutive month, reaching its highest level since April 2023. The rise in costs was attributed to higher prices for aluminum, copper, and other metals, along with increased fuel costs, which led to rising transportation prices.
In response to these inflationary pressures, firms increased their selling prices, although at the slowest rate in five months.
Business confidence improved, with better expectations for the future leading to more hiring, a renewed rise in purchasing activity, and a build-up of stocks of finished goods. "Although modest, the expansion in new work bodes well for production in the coming months. In fact, manufacturers cited confidence in the future as a factor contributing to increases in employment, purchasing activity, and finished goods stocks," said Andrew Harker, Economics Director at S&P Global Market Intelligence.
"Cost pressures continued to build, with inflation on that front reaching its strongest level in just over a year. Although output prices rose at a slower pace in May, this slower rate is unlikely to be sustainable should cost burdens continue to increase in the months ahead," Harker added.
