Breaking News: U.S. Manufacturing Slump Worsens in May, Dow Jones (DJIA) Steady

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The ISM Manufacturing PMI in the U.S. dropped to 48.5 in May 2025, down from 48.7 in April and below the expected 49.5. This marks the third straight month of decline in the manufacturing sector and the biggest drop since November 2024, showing growing economic uncertainty and ongoing cost pressures, partly due to unpredictable trade policies under the Trump administration.

Production, new orders, jobs, and backlogs all fell, though not as quickly as before, while export sales saw a sharper decline. Inventories shrank after previously growing because companies stocked up ahead of tariffs. Supplier delays continued due to port bottlenecks, and while tariff-related price increases slowed slightly, they remained high overall.

The report was issued today by Susan Spence, MBA, Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee.

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Source: ISM

A reading above 50 percent indicates that the manufacturing sector is generally expanding; below 50 percent indicates that it is generally contracting.

A Manufacturing PMI® above 42.3 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the May Manufacturing PMI® indicates the overall economy grew for the 61st straight month after last contracting in April 2020. “The past relationship between the Manufacturing PMI® and the overall economy indicates that the May reading (48.5 percent) corresponds to a change of plus-1.7 percent in real gross domestic product (GDP) on an annualized basis,” says Spence.

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Source: ISM

Impact of the ISM Report Moving Forward

The report adds further pressure on the US economy which is already facing growth questions as tariff debates continue to rumble on and the US-China relationship has come under renewed strain following what seemed to be a breakthrough in discussions.

This weekend saw accusations from both sides that they have not adhered to terms of an interim 90-day deal struck thanks to recent dialogue.

The renewed tension has been reflected in markets with a risk off tone dominating the start of the week and month as market participants continue to wait for clarity regarding trade deals. This morning we heard from US Deputy Treasury Secretary Faulkender who said: “I think we will see deals before July 9th, Some trade deals should be imminent.”

If trade deals are imminent and an announcement comes this week it could help improve overall sentiment which has faced growing challenges of late.

For the full ISM report, click here: https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/may/

Market Reaction - Dow Jones (DJIA)

The Dow Jones Index is in the red today thanks in large part to overall risk off sentiment.

The data however, saw an initial spike lower before recovering to trade slightly higher once markets digested the news.

Overall sentiment and pressure on steel and aluminum stocks are having an impact on indexes across the globe this morning, with the Dow proving to be no exception.

Market participants expecting US data to provide a bit of optimism will likely be glad that the Dow Jones did not record a particularly bad reaction to the data.

Immediate intraday resistance rests at 42144 before the 42192 and 42270 handles come into focus.

Immediate support rests at 41900 before the 41780 and 41660 handles may come into play.

Dow Jones M15 Chart, June 2, 2025

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Source: TradingView

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