U.S. manufacturing activity accelerated in July after a modest slowdown in June, hitting its best mark since June 2022, according to the latest Purchasing Managers Index from the Institute for Supply Management, published Aug. 3.

Seen as a reliable barometer for the industrial sector, the PMI registered 55.6% in July, 2.3 percentage points from June. That bested market expectations of 54.0%.

Four of the five core subindexes that comprise the PMI expanded in July, with New Orders (+6.3 points) and Employment (+3.1) posting solid acceleration to power the top-line figure. New Orders (+0.7) and also increased, while Supplier Deliveries — the only subindex that is inverted (anything above 50% indicated slower deliveries) — indicated accelerating performance for the first time in eight months with a 1.5-point incrase. Within the other five subindexes, Prices slowed by another 1.9 points after a much larger 9.1-point drop in June.

ISM shared that 20% of the manufacturing sector’s GDP contracted in July, compared to 5% in June, and no percentage of GDP in strong contraction (composite PMI of 45% or lower), vs. 3% in June.

Four of the six largest manufacturing industries expanded in July, in the order of Transportation Equipment; Machinery; Computer & Electronic Products; and Food, Beverage & Tobacco.

ISM PMI May Survey Respondent Commentary

In the July survey commentary collected by the ISM, 38% of comments were positive and 62% negative — a slight improvement from 34/66% in June. Among negative comments, pricing volatility was mentioned in 57%, the Rian war 43%, increasing lead times 22% and tariffs 18%.

Here is a sampling of commentary provided by ISM in its July manufacturing PMI report:

• “We are seeing a very opportunistic and reactive marketplace. If shortage items become available, we opportunistically buy. Some customers are reducing inventory; others are pulling forward demand. As many customers that are slowing down, an equal number are growing. It looks like a lot of shuffling and shifting market share.” [Chemical Products]
• “We continue to operate in a favorable demand environment driven by growth in the semiconductor, AI, advanced packaging, and high-performance computing markets. Recent company reports indicate strong sales growth and continued investment in manufacturing capacity, technology and customer-support capabilities. This scenario supports a positive business outlook and creates opportunities to leverage increased purchasing scale across the enterprise.” [Computer & Electronic Products]
• “Now that it seems the buildout of AI infrastructure globally is nearing real activation, products going into data centers are at full procurement and manufacturing ramp-up. Thus, demand for our semiconductor end products and connectivity (power, networking and photonics) is booming. Similarly, defense is at an all-time high, with most of our product orders going to these two industries. Order volumes for medical, industrial and consumer products are markedly lower.” [Machinery]
• “Aerospace and defense demand continues to be strong and growing, based on business backlogs. Competing for scare supply — electronics, certain critical minerals and other categories — is challenging on-time fulfillment for our supply chains. This is expected to get worse with co-dependent sectors also remaining strong and restocking challenges for automotive electronics.” [Transportation Equipment]
• “Continued tariffs on products utilized in our product lines are being monitored by the business, which is working to mitigate or limit tariff risk. Geopolitical risk, especially in the Middle East, pertaining to commodity and energy markets remains a concern. There has been some increased cost and transit time for rerouted shipments due to conflicts in the Red Sea, Strait of Hormuz and Suez Canal.” [Transportation Equipment]
• “Business is still solid; we will increase revenue by 3 percent to 5 percent. We are considering foreign steel purchases for early next year because domestic steel mills are getting greedy.” [Fabricated Metal Products]
• “No normalcy in sight in the world of metals. It makes me yearn for the coronavirus pandemic chaos, which was more manageable than whatever this is that we are in.  At least business is better; however, the components of good business are not. Sharp pricing downturns in aluminum will make things more interesting, as supply levels will prevent those decreases from taking hold across the board. Getting customers to understand that is not always easy.” [Primary Metals]
• “The pricing volatility and lead-time extensions in this market are arguably worse than the pandemic era. During COVID-19, we saw a surge of price hikes and inventory buy-ups, which caused constraints that eventually leveled out. We are seeing nothing but consistent upward trends for both pricing and lead times that show no signs of slowing down. Specifically, 5-percent to 25-percent price increases for printed circuit board assembly components and 15-percent to 45-percent increases for bare boards are negatively impacting customer demand outlook into next year. This isn’t sustainable.” [Electrical Equipment, Appliances & Components]
• “Our customers in Asia continue to procure elsewhere to avoid paying a tariff. While the Iran war was paused, it was terrific to see fuel prices (and delivery costs) falling steadily. Now that skirmishes have resumed, we expect fuel to rise again.” [Paper Products]
• “Definitely a downturn within several of our business units, mainly the consumer products division. High freight costs, both for truck and ocean, and longer lead times are concerning. Pricing was moving downward until the Iran war started again.” [Chemical Products]