Much of the growth has been tied to continued investment in artificial intelligence infrastructure, including data centers, semiconductors and related equipment. Manufacturers supplying those markets have benefited from sustained demand even as other sectors continue navigating higher borrowing costs and economic uncertainty.

New orders increased at their fastest pace in four months, while order backlogs also grew, suggesting many companies are placing orders earlier than usual as they seek to protect themselves from rising costs and potential supply-chain disruptions.

Manufacturers are also contending with higher material costs linked to geopolitical instability and ongoing supply-chain challenges. Disruptions affecting global shipping routes and commodity markets have increased costs for energy, metals and other industrial inputs.

Despite those pressures, factory production continued to expand as companies increased output and inventory levels to meet demand.

The report suggests manufacturers are increasingly balancing investments in growth and capacity expansion against continued uncertainty surrounding inflation, supply chains and global trade conditions.

Employment, however, remains a weak spot. Manufacturing payrolls continued to contract in May, indicating that many companies are relying on productivity improvements, automation and selective hiring rather than broad workforce expansion to support growth.

The combination of strong production activity, rising orders and continued investment in advanced manufacturing technologies points to growing momentum in the sector, even as cost pressures and labor challenges persist.