U.S. manufacturing increased at a slightly faster rate in May, according to the Institute for Supply Management’s latest manufacturing PMI survey. The headline figure rose 1.3 points to 54%, indicating slow but increasing sector growth. That figure was buoyed by positive figures in new orders and production, but hobbled somewhat by contracting manufacturing employment.

The ISM’s indexes tracking manufacturing orders and production both increased last month. The new orders index rose by 2.7 points to land at 56.8%, while the production index rose by 0.9 points to 54.3%. Employment showed contraction at 48.6%, but improved by 2.2 points since April, showing slower contraction than previously.

The remaining subindexes used to calculate the ISM’s headline figure showed supplier deliveries continuing to slow down at a similar rate to April, remaining steady at 60.6%, while manufacturer inventories were found to contract slightly at 49.9%.

Despite the positive results for manufacturing generally, surveyed executives remained concerned about the pressure of rising commodities prices due to the Iran War. The ISM’s index of prices fell 2.5 points to 84.6%, representing the twentieth month running that saw prices increasing.

“In May, U.S. manufacturing activity remained in expansion territory, growing at a faster pace compared to the month before,” said Susan Spence, Chair of the ISM’s Manufacturing Business Survey Committee. “Of the five subindexes that make up the PMI®, the New Orders index indicated faster growth compared to the previous month, the Supplier Deliveries index stayed the same, the Production Index grew at a faster rate, and the Employment and Inventories indexes remained in contraction, though both improved. In May, 25% of the comments were positive and 69% negative, with a 1-to-2.7 ratio of positive to negative sentiment. Among comments, the Iran war was mentioned in 42% and tariffs in 18%; 57% of the panelists mentioned pricing volatility as an issue for their companies,” Spence added.

“Prices continue to rise for many products — some due to increase in data center creation for electronic components, others as a result of the Iran war and reductions in availability of oil/petroleum,” said an anonymous computer & electronics executive.

“Supply constraints continue to propagate and are a key headwind to supporting increased aerospace and defense demand,” said an anonymous transportation equipment executive. “Semiconductors, critical minerals and certain types of raw materials are illustrative examples of sales plans at risk. Corporate risk mitigation actions are underway to secure supply in the midst of constraints.”