News

In July, the U.S. manufacturing sector contracted for the fifth consecutive month and at a faster pace than the prior month, with the ISM Manufacturing^® PMI decreasing to 48.0% from 49.0% in June. On the other hand, demand indicators improved in July, with the New Orders and Backlog of Orders Indexes contracting at a slower pace, rising to 47.1% and 46.8%, respectively. Meanwhile, the New Export Orders and Employment Indexes contracted at a faster pace, falling to 46.1% and 43.4%, respectively. Inventories (48.9%) also contracted at a slightly faster pace, as companies worked to adjust inventory to better align with demand. On the other hand, the Production Index increased at a faster pace, rising from 50.3% to 51.4%.

The New Orders Index contracted for the sixth consecutive month but at a slightly slower pace than the prior month, a 0.7 percentage points rise from June. The index hasn’t shown consistent growth since a 24-month streak of expansion ended in May 2022. Of the six-largest manufacturing sectors, none reported an increase in new orders. Respondents noted continued weak demand, with the top issue in negotiations between buyers and sellers being which party will pay the tariff costs.

The New Export Orders Index contracted for a fifth consecutive month and at a slightly faster pace, 0.2 percentage points lower than June. The continued contraction is likely indicative of dampened demand amid ongoing trade tensions. Meanwhile, the Imports Index contracted for a fourth consecutive month but at a slightly slower rate, up 0.2 percentage points to 47.6% in July. Imports continue to contract as tariff pricing results in lower demand compared to prior months, resulting in a reduced need to maintain import levels.

The Employment Index contracted for the sixth consecutive month and at a faster pace than the prior month, down 1.6 percentage points from June to 43.4%. Of the six-largest manufacturing sectors, none reported increased employment. Companies continued to reduce headcounts through layoffs, attrition and hiring freezes, while opting for layoffs at an accelerating pace due to uncertainty around near- to mid-term demand. For every mention of hiring, there were two respondents noting reduced headcounts, a wide ratio from a historical standpoint.

The Prices Index decreased 4.9 percentage points to 64.8%, indicating prices for raw materials increased for the 10th straight month in July, but at a slower pace. The increase continues to be driven by the dramatic rise in steel and aluminum prices impacting the entire supply chain, as well as the tariffs applied to most imported goods. More than 35% of companies reported paying higher prices, down substantially from 45.6% in June but still up dramatically from 21% in January.