U.S. Manufacturing Growth Hides Underlying Tariff Fears

U.S. manufacturing activity for May, as tracked by S&P Global’s Manufacturing Purchasing Managers’ Index (PMI), tallied in at 52.0, below the expectation for 52.3 and rising from 50.2 in April.

As the name suggests, the index tracks manufacturing activity through a survey of professionals responsible for overseeing the acquisition of goods and services. A reading above 50 indicates expansion while a reading below 50 indicates contraction.

The index is a gauge for economic health and is a leading indicator because purchasing managers are responsible for ordering resources that are later used in production. A higher reading can signal more production, demand for goods and services, and hiring, which all benefit the stock market.

Tariffs Fears Drive Manufacturing Growth

Still, some of the growth is attributed to companies placing orders in elevated volumes in an attempt to front-run tariffs, said S&P Global. The strategy also contributed to purchasing managers reporting higher input prices and inventory, as well as supply chain disruptions.

“While growth of new orders picked up and suppliers were reportedly busier as companies built up their inventory levels at an unprecedented rate, the common theme was a temporary surge in demand as manufacturers and their customers worry about supply issues and rising prices,” said S&P Global Chief Business Economist Chris Williamson.

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