U.S. factory activity rises as firms rush orders before shortages

U.S. factory activity rose again as companies rushed new orders ahead of possible shortages and higher prices, even as factory employment fell to a six-year low. S&P Global’s flash U.S. manufacturing purchasing managers’ index climbed to 55.7 in June from 55.1 in May, the strongest reading since May 2022. A reading above 50 signals expansion, and June also brought the first rise in manufacturing output since February.

The latest survey covered June 12 through June 20 and was based on about 85% of usual responses, giving an early read on how companies were navigating tariffs, supply risks and higher input costs. New orders across the broader private sector rose for a 14th straight month, but export orders fell in June even as domestic demand kept the sector growing. Manufacturers also increased input purchasing at the fastest pace in 37 months and built inventories of both inputs and finished goods again, a sign that many firms were stocking up rather than waiting for conditions to improve.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said the flash reading showed the U.S. economy continued to grow at the end of the second quarter, but he warned that “the outlook remains uncertain” and that inflationary pressures “have risen sharply in the past two months.” Backlogs of work rose at the fastest pace in more than three years, which supported hiring in parts of the private sector, but the manufacturing labor market remained weak even as output improved.

That split leaves factories in a difficult position. The headline PMI pointed to expansion, yet the employment component showed companies were still trimming staff or freezing hiring, suggesting they are preparing for a rougher cost environment rather than betting on a clean recovery. Manufacturing accounts for about 9.4% of the U.S. economy, so the weakness in factory payrolls carries beyond the industrial sector into wages, local spending and supplier demand in manufacturing-heavy states.

June’s gains also fit a pattern that has been building for months. Manufacturing activity had already reached a four-year high in May as businesses front-loaded orders ahead of war-related shortages and price fears, and the June numbers suggest that same behavior is still shaping the data. If firms keep ordering early to beat disruptions, the PMI can stay elevated even while factories continue to shed workers.