The ISM Manufacturing PMI, a key gauge of U.S. factory activity, rose to 55.6 in July from 53.3 in June. This marks the seventh straight month of growth and the strongest reading since May 2022. Demand improved over the month: new orders rose to 56.7 from 56.0, production increased to 58.5 from 52.2, and new export orders strengthened to 53.0 after dipping to 48.5 in June. Growth also became more broad-based, with 15 of the 18 manufacturing industries reporting expansion in July.
The quality of demand also improved relative to June. The ISM chair noted that new orders and the order backlog both grew faster in July, a sign that demand is outpacing current production rather than reflecting orders pulled forward from earlier months. Customer inventories also remained too low, which tends to support further production in the months ahead.
This acceleration in demand has been paired with easing inflation and a notable improvement in the labor market. The Prices Index fell to 71.1 from 73.0, its third straight monthly decline, but remains at a level that points to continued input cost inflation. The ISM chair pointed to steel and aluminum prices, tariffs, and petroleum costs tied to the Middle East conflict as the main drivers keeping prices elevated. Labor conditions showed a clear break from the recent trend. Manufacturing employment rose to 52.8 from 49.7, moving into growth for the first time in 33 months. This marks a shift after nearly three years in which firms met rising demand mainly through productivity gains rather than hiring, suggesting companies are now adding workers to keep pace with growth.
What This Can Mean for Investors
For investors, the July ISM report sends a mixed but mostly positive message. On one hand, the manufacturing sector is clearly growing: more industries are expanding, orders are rising, and companies are finally hiring again after years of holding back. That is a good sign for economic growth and corporate earnings in the months ahead.
On the other hand, costs for raw materials like steel, aluminum, and energy are still high, and tensions in the Middle East add uncertainty about where prices might go next. This means not every company will benefit equally. Businesses that can pass higher costs on to customers and manage their supply chains well are more likely to see profits rise. Those that can’t, may see their growth swallowed up by higher expenses.
In short, the overall economy looks stronger, but stock performance may depend more on individual companies’ ability to manage costs and pricing than on the broad trend alone.
Disclosure
This material is provided by Gryphon Financial Partners, LLC (“Gryphon”) for informational purposes only. It is not intended as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Facts presented have been obtained from sources believed to be reliable, though Gryphon cannot guarantee their accuracy or completeness. Gryphon does not provide tax, accounting, or legal advice. Individuals should seek such guidance from qualified professionals based on their specific circumstances.