News

The S&P Global U.S. Manufacturing PMI was 49.8 in July, down considerably from the June reading of 52.9 and the first contraction after six consecutive months of growth. New orders effectively stagnated, growing at the slowest pace seen all year, with uncertainty created by tariffs leading to hesitancy in committing to new orders. Weak sales resulted in production growth softening from June. Tariffs led to steep increases in both input and output costs in July, but the pace of increase slowed from June. Despite easing, selling prices rose at the second-sharpest rate since November 2022.

Diminished international demand led to new export orders declining for the first time in three months, with weaker sales notes in China, the European Union and Japan. As the need to front run tariffs waned, factories noted reduced inventory of both raw materials and finished goods in July. As anticipated, because inventory growth rose at such a steep pace to protect against supply-side disruptions from tariffs, that growth has slowed, and firms started utilizing their stock holdings rather than sourcing new inputs.

Meanwhile, federal policies weighed on business confidence, but firms are still hopeful that output will improve in a year’s time, which appears to be hinged largely on a resolution of tariff uncertainty. As manufacturers face lower demand, firms reduced employment levels, the first net reduction since April. Meanwhile, weak new orders led to backlogs of work falling in July after increasing slightly the prior month.