The US manufacturing sector continued to grow in July, with Institute for Supply Management data indicating the fastest expansion rate in more than four years and S&P Global (SPGI) signaling steady growth pace.
The ISM's purchasing managers' index increased to 55.6 last month from 53.3 in June, hitting its highest reading since May 2022, according to a Monday statement. The consensus was for a 53.9 print in a Bloomberg poll. A reading above 50 indicates the manufacturing sector is generally expanding.
"Across the board, the details of the report show building momentum in the sector, including a growing pipeline of future activity," Thomas Simons, chief US economist at Jefferies, said in a note e-mailed to clients. "Geopolitical risk, energy price volatility and tariffs remain challenging for some firms more than others, but the sector has a whole has been resilient."
The new orders index rose to 56.7 in July from 56 the month prior, while production grew to 58.5 from 52.2, marking its highest reading in almost five years, the ISM data showed. The employment measure increased to 52.8 from 49.7, entering the expansion territory for the first time in 33 months. The prices gauge fell to 71.1 from 73, the survey showed.
"The outlook for manufacturing is likely to remain uneven," Simons said. "We remain optimistic that demand will pick up throughout the year as (artificial intelligence-related) infrastructure builds continue, and as defense capital goods orders start to come in from international partners and from the US military to replenish stocks of munitions used in Iran."
Separately, S&P Global said its manufacturing PMI remained unchanged at 53.9 sequentially in July. Growth for new orders eased for a third straight month due to soft customer sentiment, inflationary pressures, and falling export sales, while output growth "slowed sharply," the data provider said. Growth was mainly domestically driven.
"While input cost inflation moderated slightly, inflationary pressures remained elevated thanks principally to the combination of high energy prices and tariffs," S&P Global Market Intelligence Chief Business Economist Chris Williamson said. "In response, producers are either trying to raise selling prices to protect margins or boost productivity, hence July also saw another month of high factory gate price inflation and subdued job gains."
Firms' confidence in the outlook weakened for a third straight month in July, hitting its lowest level since October, according to the report.
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