The Institute for Supply Management's July reading beat economist expectations of 54.0, with production and employment both accelerating
Michael Hickey / Getty Images
The Institute for Supply Management said its manufacturing PMI rose to 55.6 in July, up 2.3 percentage points from June's 53.3 and the highest reading since May 2022, when the index hit 55.9. The sector has now expanded for seven consecutive months following a 10-month contraction. Readings above 50 indicate growth.
Economists had forecast the index would rise to 54.0, according to Yahoo Finance.
The production index drove much of the gain, jumping 6.3 percentage points to 58.5 — its highest level since November 2021. After 33 months in contraction, the employment index crossed above 50 for the first time, climbing to 52.8 from June's 49.7. New orders grew for a seventh straight month, with the New Orders Index edging up to 56.7 from 56.0. The Backlog of Orders Index rose 4.5 percentage points to 55.0, and the New Export Orders Index returned to expansion at 53.0, its highest since March 2022.
Susan Spence, chair of the ISM Manufacturing Business Survey Committee, said the July result reflected broad-based momentum, with four of five PMI subindexes growing at a faster rate than in June. "My gut is, it's not just a one or two month trend," Spence told Bloomberg. "Companies are seeing six or more months of these solid demand factors going in the right direction."
Fifteen of the 16 manufacturing industries ISM monitors expanded during the month, with Chemical Products alone reporting a contraction.
Despite the strong headline reading, input costs remained elevated. The Prices Index slipped to 71.1 from 73.0 in June, marking a third straight month of decline, though raw materials costs have continued to rise for 22 consecutive months. Spence said price pressures continued to stem from higher steel and aluminum costs, tariffs on imported goods, and petroleum-based product inflation tied to the Middle East conflict. The Supplier Deliveries Index climbed to 58.9, extending a run of slowing deliveries to eight consecutive months.
Panelist sentiment skewed negative: 62% of comments were negative in July, with pricing volatility cited in 57% of negative responses, the Iran war in 43%, increasing lead times in 22%, and tariffs in 18%.
The ISM Prices Index remained near multi-year highs through May, driven by the same combination of steel and aluminum costs, tariffs, and Middle East conflict-related energy inflation. The May PMI of 54.0 had itself been the strongest print since May 2022 before July's reading surpassed it.
ISM said the July PMI corresponds to an annualized 2.8% increase in real GDP.
Join 500,000+ readers who start their day with Quartz.
By subscribing, you agree to our Terms of Service and Privacy Policy.
