U.S. ISM Manufacturing Index (July 2025)

ISM Manufacturing Index deteriorates further in July 

• The ISM Manufacturing Index fell one point to 48.0 in July, coming in well below the market consensus forecast for a modest improvement to 49.5. 
• Seven of 18 industries reported growth for the month, down slightly from nine in June. Furthermore, 79 percent of the sector’s gross domestic product (GDP) contracted in July, up from 46 percent in June. 
• The details of the report were mixed, with two of the five key sub-indicators improving on the month, and three deteriorating. The new orders index recorded a modest improvement (up 0.7 points to 47.1), while the production index edged modestly higher into expansionary territory (up 1.1 points to 51.4). 
• The employment index headed further into contractionary territory (-1.6 points to 43.4), while inventories ticked lower (-0.3 points to 48.9). Meanwhile, the 'supplier deliveries index' fell 4.9 points to 49.3, indicating faster delivery performance after seven consecutive months in expansion territory. Recall that this latter index is inversed, with a reading below 50 indicating faster deliveries, which is typical of a declining economy and slower customer demand (and vice-versa). 
• The prices index fell a substantial 4.9 points, but at 64.8 it is still at one of the highest levels in three years.  

Key Implications

• The deterioration in today's ISM report keeps intact the broader narrative of a sluggish manufacturing backdrop amidst elevated trade uncertainty. The details of the report reinforce this view, with employment, inventories, and new orders holding in contractionary territory for several months now, and 'supplier deliveries' also joining the group last month.  
• Reduced price pressure in July is a welcome development, but the prices paid index is still near a 3-year high, and we don’t anticipate the July drop will mark the start of a new trend. With more tariffs having been announced recently, including the new levies for a number of countries announced today, which are generally higher compared to the status quo of a few months ago, we anticipate further upside pressure in prices in the months ahead, with the potential for manufacturers to pass down some of these added costs to the U.S. consumer.

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