Procurement Leaders Handle Volatility as US Factories Expand

US manufacturing procurement teams recorded their fifth month of expansion in May 2026, according to purchasing and supply executives surveyed for the Institute for Supply Management Manufacturing PMI Report.

The manufacturing PMI reached 54% in May, which was 1.3% higher than April 2026 and the strongest result since May 2022 when the index registered 55.9%.

According to the ISM, 16 manufacturing industries reported growth during May, including computer and electronic products, chemical products and food, beverage and tobacco products.

The sustained expansion marks a significant turnaround for procurement professionals who navigated challenging market conditions throughout the previous year.

Procurement teams cite tariff uncertainty

The ISM report compiled data from purchasing and supply executives across the US and found that both tariffs and the Iran conflict weighed on procurement operations.

Susan Spence, Chair of the ISM Manufacturing Business Survey Committee, says: "Among comments, the Iran war was mentioned in 42% and tariffs in 18%; 57% of the panellists mentioned pricing volatility as an issue for their companies."

The manufacturing sector expanded in May for the fifth consecutive month following a 10-month period of contraction.

Economists polled by Reuters had forecast the PMI rising to 53%.

According to the ISM, 14 industries reported growth in production during May, including textile mills, primary metals, electronic products and chemicals.

Reuters theorised the growth in US manufacturing activity could have been driven by businesses front-loading orders amid rising prices and shortages due to the US war with Iran.

Procurement teams reported accelerating their purchasing schedules to secure inventory before anticipated price increases, placing additional pressure on supplier relationships and working capital requirements.

Supplier delivery performance deteriorates

The ISM report noted that the delivery performance of suppliers to manufacturing organisations was slower in May for the sixth consecutive month.

Growth in manufacturing occurred despite many industries reporting increased costs for raw materials, including paper chemical products, computer and electronic products, primary metals, machinery and food, beverage and tobacco products.

A respondent from the food, beverage and tobacco products industry tells the ISM: "Cost of diesel is having huge impacts on our profitability. Confusion abounds around tariff refunds. We purchase many imported goods but in most cases are not the importer of record, so it is currently unclear to what we may be entitled."

According to industry data, the price of diesel has risen by approximately 47% since early March to around US$5.52 per gallon.

The rapid rise has been driven by the closure of the Strait of Hormuz, a result of the US and Israel instigated war on Iran.

The Iran war dominated comments from manufacturers with many noting the negative impact on supply chains.

Mary Barra, CEO of General Motors tells investors in the company's Q1 2026 earnings call: "The war in Iran has raised our costs and its duration remains uncertain."

Tariff complexity creates procurement challenges

US President, Donald Trump, has enacted tariffs on various countries since taking office, including China and the UK, and has targeted specific commodities.

According to JP Morgan Global Research, tariffs have ignited an international response, increased market volatility and created material headwinds that the global financial institution believes will weigh on growth.

18% of respondents in the ISM survey commented negatively about tariffs affecting business.

Procurement departments are investing additional resources in tariff classification analysis and exploring alternative sourcing strategies to mitigate cost impacts.

A respondent from the electrical equipment, appliances and components industry tells the ISM: "Continued dynamic random access memory volatility, increased gas prices and tariffs are causing long lead constraints and price hikes that customers are not willing to bear. Panic is starting within our industry."