U.S. manufacturing growth hits four-year high

TEMPE, Ariz. – U.S. manufacturing activity accelerated in July, reaching its strongest level in more than four years, as new orders, production and employment all increased, according to the latest Institute for Supply Management Manufacturing PMI report.

The Manufacturing PMI registered 55.6% in July, up 2.3 percentage points from June and marking the highest reading since May 2022. The sector has now expanded for seven consecutive months, while the broader U.S. economy has remained in expansion for 21 straight months.

Production was a major driver of the increase. ISM’s Production Index jumped 6.3 percentage points to 58.5%, its highest level since November 2021, while the New Orders Index rose to 56.7%. Employment also returned to growth, rising to 52.8% from 49.7% in June and entering expansion territory for the first time in 33 months.

For the retail and consumer goods sectors, the report offered a mixed picture. Food, Beverage & Tobacco Products was among the four largest manufacturing industries reporting overall growth in July and was one of the major sectors reporting higher employment. However, manufacturers continued to face elevated input costs and supply chain pressures.

ISM’s Prices Index remained high at 71.1%, indicating raw material prices increased for the 22nd consecutive month. Steel, aluminum, tariffs, and higher petroleum-related costs tied to the Middle East conflict remained among the major sources of pricing pressure. Food, Beverage & Tobacco Products was also among the largest industries reporting higher input prices.

Supplier deliveries slowed for the eighth consecutive month, while customer inventories remained in “too low” territory. ISM said that low customer inventories are generally considered a positive signal for future production, suggesting manufacturers could see continued demand as customers rebuild stock levels.

Despite stronger headline numbers, manufacturers remain cautious. ISM reported that 62% of respondents' comments in July were negative, with pricing volatility, the Iran war, longer lead times and tariffs among the most frequently cited concerns.