U.S. ISM Manufacturing PMI at Highest Level Since May ’22; New Orders, Production, and Employment Growing

The latest data from the Institute for Supply Management confirms that the U.S. manufacturing sector is picking up significant steam. In July, the Manufacturing PMI rose to 55.6, beating analyst expectations and marking the fastest pace of growth since May 2022. This reading places the sector well above the 50-point mark that separates expansion from contraction, signaling seven consecutive months of growth for U.S. producers.

Driving this performance is a substantial rebound in production, which reached its strongest level since late 2021. New orders also climbed to 56.7, reflecting sustained demand for goods across the country. Perhaps most notably, the employment index jumped to 52.8 in July, showing job growth in the manufacturing sector for the first time since September 2023. This is a critical indicator of industrial confidence as firms scale up their operations to meet rising order backlogs.

While output is growing, the cost of raw materials remains a persistent factor for businesses. The prices paid index sat at 71.1 in July, marking the 22nd straight month of cost increases. Although this rate of inflation is the slowest seen since February, more than half of the surveyed executives still reported paying higher prices for inputs compared to the previous month. Businesses are navigating these higher costs while attempting to keep pace with demand, as evidenced by an increase in supplier delivery times.

Other indicators within the report suggest a broader push in activity. New export orders reached their highest point since March 2022, and the imports index hit its strongest rate since mid-2021. The order backlog index also moved higher, indicating that manufacturers have a steady pipeline of work heading into the next quarter. The ISM report draws on input from over 400 purchasing and supply executives across 18 distinct industries to form a representative picture of the industrial economy.

With production, employment, and new orders all moving in the right direction, the sector shows clear signs of stability. Tracking these figures is essential for understanding the underlying health of the national industrial base as manufacturers manage both the demand for goods and the ongoing reality of elevated production costs.