U.S. manufacturing activity hits highest level since 2022

U.S. manufacturing activity jumped in July to 55.6, the strongest reading since May 2022, even as factories kept paying more for materials, parts and logistics. The Institute for Supply Management said the headline Manufacturing PMI rose 2.3 percentage points from 53.3 in June, extending the sector’s expansion to a seventh straight month after a 10-month stretch of contraction.

The details inside the report pointed to broadening demand. All five subindexes that feed the Manufacturing PMI, New Orders, Production, Employment, Supplier Deliveries and Inventories, were in expansion territory in July, one more than in June. The New Orders index rose to 56.7 from 56.0, matching expectations and signaling that customer demand is still firm enough to keep factories busy.

Employment also improved. The July reading moved back into expansion for the first time since September 2023, a sign that manufacturers are beginning to add labor after a long period in which hiring lagged output. Stronger orders and output usually help support capital spending and payrolls, especially in industries that depend on domestic demand and the flow of goods through long supply chains.

At the same time, the cost side of the report remained a warning light. The Prices Paid index came in at 71.1, down from 73.0 in June but still at a level that shows heavy cost pressure across the factory sector. That matters because higher input costs can squeeze margins for manufacturers and, if firms pass those costs along, can reach consumers in the form of pricier goods.

The mixed message comes as policymakers and investors are trying to judge whether manufacturing is entering a durable rebound or simply bouncing higher while inflation pressure persists. July’s data suggest momentum is improving, but the strength is not coming from cheaper inputs. For companies, that means more orders may be arriving at the same time that raw materials and transport remain expensive, complicating pricing decisions and profit forecasts.

Susan Spence, chair of the ISM Manufacturing Business Committee, discussed the July release with host Dan Zeiger in an Aug. 3 LinkedIn Live recap. The timing mattered: ISM publishes the Manufacturing PMI on the first business day of each month at 10 a.m. EST, making the report one of the earliest official reads on how U.S. industrial activity is moving.