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US ISM manufacturing PMI rises to a 3-year high on firmer employment
The ISM survey links stronger output and renewed labor expansion to annualized real GDP growth near 2.8%, while input prices stay elevated.
US manufacturing activity accelerated in July, with the Institute for Supply Management Manufacturing PMI rising to 55.6 from 53.3, the highest reading since May 2022 and above market expectations, Action Forex reported. ISM said the new data is historically consistent with annualized real GDP growth of around 2.8%, suggesting the third quarter got underway on a solid footing even as interest rates remain elevated and geopolitical uncertainty persists. The gain was broad-based, led by a sharp jump in the Production Index, which rose 6.3 points to 58.5, extending expansion to a ninth consecutive month.
The employment side also improved, with the Employment Index climbing to 52.8 from 49.7 and returning to expansion territory for the first time in 33 months, reaching its highest level since August 2022. ISM also cited stronger new orders and export demand in pointing to improving manufacturing activity rather than a brief rebound.
Inflation pressures remained a key feature of the report. The Prices Index eased to 71.1 from 73.0 but stayed elevated, with respondents attributing higher prices to steel and aluminum costs, tariffs on imported goods, and rising petroleum-based product prices tied to the Middle East conflict.
Action Forex said the combination of stronger production, expanding employment, and still elevated input prices keeps the door open for the Federal Reserve to consider another rate hike if inflation proves stubborn. It noted that while price pressures eased, risks have not disappeared.