The latest data shows that manufacturing activity in the United States expanded at the fastest pace in over four years in July, with strong demand, significant output growth, and an increase in workforce by businesses.
According to a report released by the Institute for Supply Management (ISM) on Monday, August 3rd, the ISM Manufacturing Purchasing Managers’ Index (PMI) in the United States rose from 53.3 in June to 55.6 in July, reaching its highest level since May 2022, exceeding the economists’ prior forecast of 54.0.
The PMI, with 50 as the threshold, indicates expansion in manufacturing when above 50 and contraction when below. The data released by ISM on Monday indicates that the manufacturing sector, accounting for approximately 9.4% of the total U.S. economy, continued to expand, with the PMI staying above 50 for seven consecutive months.
The Production Index rose to 58.5, the highest level since the end of 2021; the Employment Index showed that manufacturers increased their workforce for the first time since September 2023; the forward-looking New Orders Index in the ISM survey also grew from 56.0 in June to 56.7 in July.
The Prices Index decreased from 73.0 in June to 71.1 in July but remained elevated. This reading may reflect a temporary decline in oil prices in June during the ceasefire between the U.S. and Iran, which rose again as the ceasefire broke in July.
The strong momentum in the U.S. manufacturing sector this year is attributed to robust consumer demand, steady business investment, and increased defense spending by the government.
Susan Spence, chair of the ISM Manufacturing Business Survey Committee, stated that due to sustained strong demand, reduced uncertainty in tariffs, and the expectation of diminished disruptions from the conflict with Iran, businesses have started increasing hiring. The last manufacturing hiring spree occurred in September 2023 but lasted only one month.
She told reporters, “My intuition tells me this is not just a one or two month trend. Businesses are seeing these strong demand factors continuing in the right direction for six months or longer.”
(Reference: Bloomberg)