Manufacturing continued to expand in April, boosted by new orders despite sharp price pressures amid the Iran war.

The ISM held steady at 52.7% for April after posting that same score in March. It’s the fourth straight month of expansion for the industry (indicated by any number above 50) after a prolonged period of contraction. But the price index leapt 6.3 percentage points to hit 84.6, its highest score since April 2022, compounding concerns about inflation. 

The numbers show an industry benefitting from increased demand in recent months, consistent with an economy that remains stubbornly strong despite headwinds. Personal spending among high earners and massive AI investments have propped up economic growth; the AI boom has also been good business for manufacturers whose products are crucial to data centers. But with no clear timeline in sight for the end of the Iran war, the price index at a four-year high dampens the picture. Economists are divided about whether that signals real trouble on the horizon for the industry. 

“The most surprising thing to me is the strength of orders, especially given how the conflict in the Gulf has just injected uncertainty into everything, including consumer sentiment” FHN Chief Economist Chris Low said. “It doesn’t seem to have affected demand for manufactured goods.”

New orders continued to increase in April, ticking up from 53.5% to 54.1%. Customers’ inventories were marked “too low” and contracted a percentage point faster than in March, a good signal for future orders. 

Manufacturers of metal, electronics and more have seen a boost in demand from the data center buildout. The study’s list of commodities in short supply hints at that activity: four of the six inputs listed were electronic and electrical components, semiconductors and memory. 

Industry-wide adjustment to tariffs may also be bolstering demand. Bill Adams, Chief US Economist at Fifth Third Bank, said that 2025’s volatile trade policy landscape caused domestic buyers to delay purchasing decisions, while this year tariffs are seen as the status quo. 

“Focus is shifting away from tariffs and back towards what businesses can control,” Adams said. “That backlog of delayed production and delayed purchasing is fueling more demand this year.”

(Data source: Investing.com)

Prices on the rise 

Inflation and geopolitical uncertainty were top of mind for manufacturers, with nearly every respondent quoted in the survey expressing concern. Delayed input deliveries were also on the rise amid global supply chain breakdowns. 

BMO Capital Markets Chief Economist Jennifer Lee argued those pressures paint a generally negative picture for the industry. 

“The longer this thing lasts for, the more it’s going to drag on demand and production overall,” Lee said.  

Oil prices, in particular, have caused strain. Kyle Crum, president of Wisconsin-based precision manufacturing firm Infinity EDM, said he’s been feeling the impact of increasing freight expenses. 

“I can’t stop and wait for gas prices or diesel prices to fall,” Crum said. “We see the receipt from the truck driver, and yes — per mile, it’s just more expensive.” 

So far his business has “eaten” the cost, Crum added. But his team has been having conversations about how long diesel prices will remain inflated and whether to incorporate that into their rates. 

Productivity growing, workforce shrinking? 

Production continued to expand for the sixth month in a row, posting at 53.4. But the report’s employment index remained in contraction — as it has been for years — decreasing 2.3 points to a score of 46.4. 60% of respondents said they were managing headcounts rather than hiring, with a third of that group reporting layoffs. 

Economists had expected a higher score.

“I would think after four months of solidly above-50 numbers we ought to be looking at some indication of hiring plans,” Low said.

Advancements in shop floor automation may be a contributing factor. Manufacturers contending with an ever-smaller pool of skilled tradespeople, particularly among younger generations, may see that technology as the right investment. 

“Every business that’s growing is doing it with an eye on technology and keeping labor costs low,” said Low. He described the numbers as troubling. 

“What’s the point of the economy if it’s not generating income?” he added. “It’s not just about producing more stuff.”