US manufacturing PMI jumps to 55.6, fastest pace since 2022

US manufacturing expanded at its fastest pace in four years in July, with the ISM PMI jumping to 55.6 from 53.3 as production surged and hiring returned to growth.

"The Manufacturing PMI registered 55.6 percent in July, 2.3 percentage points above the June figure and the highest reading since May 2022," said Susan Spence, Chair of the Institute for Supply Management Manufacturing Business Survey Committee.

The Production Index rose 6.3 points to 58.5, the highest since November 2021, while the Employment Index climbed 3.1 points to 52.8, ending a 33-month contraction streak. New Orders expanded for a seventh straight month at 56.7, and the Backlog of Orders index jumped 4.5 points to 55.0. Prices eased for a third consecutive month to 71.1, though raw material costs remain elevated after 22 months of increases.

The reading implies real GDP growth of 2.8 percent on an annualized basis, according to ISM's historical relationship between the PMI and the broader economy. With 15 of 18 manufacturing industries reporting expansion and 60 percent of panelists hiring, the data strengthens the case for a resilient US economy — though persistent price pressures and supply chain strain tied to the Middle East conflict could complicate the Federal Reserve's path on rates.

Production and hiring lead the expansion

The production surge was broad-based, with 12 industries reporting output growth and none reporting declines. Transportation Equipment, Computer & Electronic Products, Machinery, and Food, Beverage & Tobacco Products — four of the six largest manufacturing industries — all expanded in July. The employment index's return to growth at 52.8 marks its highest level since August 2022, with 60 percent of panelists reporting they are hiring.

New export orders returned to expansion at 53.0, up 4.5 points from June's 48.5, while imports climbed to 55.7, the highest since June 2021. Customers' inventories fell further to 40.7, a level that typically points to future production gains as downstream stockpiles remain lean.

Prices ease but stay elevated at 71.1

Despite three consecutive monthly declines, the Prices Index at 71.1 reflects continued upward pressure from steel and aluminum costs, tariffs on imported goods, and petroleum-based products tied to the Middle East conflict. Panelists cited pricing volatility in 57 percent of negative comments, with the Iran war mentioned in 43 percent and tariffs in 18 percent.

Supplier deliveries slowed for an eighth consecutive month, with the index at 58.9, as firms compete for scarce electronics, critical minerals, and other components. Lead times for production materials extended to 87 days, up three days from June. The S&P Global US manufacturing PMI was revised up to 53.9 for July, confirming the ISM's direction of travel, though its output growth eased to the weakest pace since March.

The manufacturing acceleration comes as markets digest the implications for monetary policy. The Dow Jones Industrial Average rose 1.1 percent on Monday, while the S&P 500 gained 0.68 percent and the Nasdaq Composite advanced 0.86 percent, as President Donald Trump called off fresh strikes on Iran, easing energy price concerns. Brent crude fell 5.36 percent to $83.22 a barrel, and the 10-year Treasury yield slipped about 4.5 basis points to 4.694 percent.

The last time the ISM PMI exceeded 55 was in May 2022, when it registered 55.9 percent — a period when the Fed was in the early stages of its most aggressive tightening cycle in decades. The current reading, with the overall economy in its 21st month of expansion, suggests the manufacturing sector has fully recovered from the 10-month contraction that ended in December 2025.

The next ISM Manufacturing PMI report, covering August data, is scheduled for release on September 1.

This article is for informational purposes only and does not constitute investment advice.