U.S. Manufacturing Expands in July, but Demand Signals Remain Mixed — Evening Brief – 08.03.26
U.S. manufacturing activity expanded in July, with one closely watched gauge reaching a four-year high, although slower order growth and declining business confidence pointed to potential weakness ahead. Separate government data showed construction spending unexpectedly fell in June.
The final S&P Global U.S. Manufacturing Purchasing Managers’ Index registered 53.9 in July, slightly above the preliminary estimate of 53.8 and unchanged from June. Readings above 50 indicate expansion.
Despite the stable headline figure, production and sales growth softened. New orders expanded at a slower rate for the third consecutive month as inflationary pressures and subdued customer confidence weighed on demand. Growth was driven primarily by domestic sales as export orders declined again.
“Although the headline PMI held steady in July, beneath the survey we see some warning signs about the future growth trajectory,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
Meanwhile, the Institute for Supply Management’s manufacturing PMI climbed to 55.6 from 53.3 in June, surpassing the 53.8 consensus estimate and reaching its highest level since May 2022. Manufacturing expanded for a seventh consecutive month.
The ISM production index jumped to 58.5 from 52.2, while new orders increased to 56.7 from 56. Backlogs rose to 55 from 50.5, and new export orders returned to expansion at 53.
The prices index declined to 71.1 from 73 but continued to signal significant input-cost pressure.
Four of the five subindexes used to calculate the ISM PMI grew faster in July, said Susan Spence, chair of the ISM Manufacturing Business Survey Committee.
Separately, construction spending declined 0.1% in June to a seasonally adjusted annual rate of $2.17 trillion, missing expectations for a 0.3% increase. Spending was 3.2% below its year-earlier level.
Private residential construction fell 0.3%, while private nonresidential spending increased 0.1%. Public construction was virtually unchanged.