Data center and defense orders are propping things up, but non-durable goods can’t hold out anymore—this kind of market fragmentation is a bit risky.

U.S. manufacturing in May once again stalled after four consecutive months of growth, weighed down by supply chain disruptions and rising costs triggered by the Iran conflict. Monthly industrial output remained essentially flat, with utilities and mining industries growing slightly by 0.1%. Earlier surveys indicated that manufacturing demand rebounded due to the war, with increases in defense orders and data center construction, but the impact of rising costs has begun to show. Another report showed that the Producer Price Index (PPI) in May reached a year-over-year high not seen since 2022. Durable and non-durable goods diverged, with non-durable goods declining, while data center-related industries, along with computers, electronic equipment, and machinery, continued to expand.