U.S. Manufacturing Holds Expansion but Inflation Pressures Build — Evening Brief – 05.01.26

U.S. manufacturing activity remained in expansion territory in April, but the underlying drivers point to a more fragile outlook as firms navigate rising costs, supply constraints and geopolitical uncertainty.

Data from the Institute for Supply Management showed the manufacturing PMI held steady at 52.7, below the 53.0 consensus but marking a fourth consecutive month above the 50 threshold that signals expansion. The broader economy has now expanded for 18 straight months.

“In April, U.S. manufacturing activity remained in expansion territory, growing at the same pace as the month before,” said Susan Spence. “Of the five subindexes that make up the PMI, the New Orders and Supplier Deliveries indexes indicated faster growth… while the Employment and Inventories indexes remained in contraction.”

New orders rose to 54.1 from 53.5, while supplier deliveries climbed to 60.6, reflecting ongoing supply chain frictions. At the same time, the prices index surged to 84.6 from 78.3, underscoring intensifying inflation pressures. Employment weakened further, falling to 46.4, suggesting labor remains a constraint.

Separate data from S&P Global painted a stronger headline picture, with its manufacturing PMI rising to 54.5—its highest level since May 2022—driven by the fastest increase in new orders in four years.

However, that strength appears increasingly defensive. “The surge in manufacturing activity in April is not the cause for cheer that at first glance it suggests,” said Chris Williamson. “A key driving force… is the need for companies to get ahead of further feared price rises and supply shortages.”

With exports declining for an eleventh straight month and backlogs rising amid capacity strain, the data suggests near-term momentum may be front-loaded as firms build inventories ahead of potential disruptions.