Manufacturing growth flat as prices grow from Hormuz blockade

The Institute for Supply Management reported May 5 that manufacturing in the U.S. grew again in April as rising orders were offset by falling production and employment. The ISM’s mainline index remained steady at 52.7%, indicating a slow rate of growth in manufacturing. In comments attached to the ISM’s manufacturing PMI report by anonymous manufacturing executives, industry leaders noted that the cost of goods related to oil and diesel were rising alongside the ongoing blockade of the Strait of Hormuz.

The ISM’s index for new orders grew by 0.6 points to 54.1%, indicating slightly faster growth and sustaining a trend of four months. But it was offset in the headline figure by the production and employment indexes, both of which fell: Production continued to grow, but at a slower rate, as its index fell 1.7 points to 53.4%, while employment contracted by 2.3 points to 46.4%, sustaining a 31-month trend now in falling manufacturing employment.

Customer inventories remained in “too low” and prices continued to rise for a nineteenth month. Inventories fell by 1 point to 39.1% while prices grew by 6.3 points to 84.6%, indicating rapid price increases. “No industries reported paying decreased prices for raw materials in April,” the ISM noted.

The increase in prices was broad, and reflected by the ISM’s list of commodities up in price. April’s report found 46 commodities had increased in price over the course of April, while only natural gas was listed as having fallen in price.

What people are saying

 “In April, U.S. manufacturing activity remained in expansion territory, growing at the same pace as the month before,” said Susan Spence, Chair of the ISM’s Manufacturing Business Survey Committee. “Of the five subindexes that make up the PMI, the New Orders and Supplier Deliveries indexes indicated faster growth compared to the previous month, the Production Index grew at a slower rate, and the Employment and Inventories indexes remained in contraction. In this second month of the Iran War (at the time of data collection), 31% of the comments were positive and 69% negative, with a positive to negative sentiment ratio of 1 to 2.2. Among comments, the war was mentioned in 47% and tariffs in 1%. As was the case last month, some panelists referenced both topics within a single comment or in mixed sentiment.”

“Demand for manufactured goods is trending higher versus last year; however, geopolitical uncertainty and rising oil and diesel prices continue to weigh on demand,” said an anonymous Transportation Equipment executive. “Many customers are exercising caution and remain in a wait-and-watch mode.”

“Revenues are very strong,” said an anonymous Chemical Products executive. “However, price increases are similar to a few years ago with the supply chain crisis. All imports from China are up 15 percent to 25 percent, which is impossible for us to absorb or to fully pass along. Our suppliers in China are telling us that oil is at an all-time high, which is putting huge challenges on their cost structures.”

“Business levels have been decent this year, in line with the same period last year and improved from the second half of 2025,” said an anonymous Fabricated Metal Products executive. “However, higher cost pressures are impacting margins.”