U.S. ISM Manufacturing Index (July 2026)

ISM Manufacturing Index Shows Expansion Picks Up Steam 

• The ISM Manufacturing PMI rose from 53.3 to 55.6 in July, marking the seventh consecutive month of expansion and the strongest reading since May 2022. Growth was broad-based, with 15 of 18 manufacturing industries reporting expansion. 
• Demand momentum firmed modestly: new orders edged up to 56.7 from 56.0, while backlogs jumped to 55.0 from 50.5. Customer inventories fell further into “too low” territory at 40.7, suggesting firms may need to keep production running to rebuild stockpiles. 
• Production provided the biggest lift, rising 6.3 points to 58.5 — its highest level since November 2021. Supplier deliveries also slowed further, with the index rising to 58.9 from 57.4, a sign that stronger demand and supply frictions are extending delivery times. 
• Employment improved to 52.8 from 49.7, moving into expansion for the first time in 33 months. The shift suggests manufacturers are beginning to add headcount after a long period of restraint, though hiring plans remain sensitive to demand visibility and cost pressures. 
• Price pressures eased for a third straight month, with the prices index slipping to 71.1 from 73.0. Even so, input costs remain elevated, with respondents continuing to cite tariffs, metals prices, transportation constraints and geopolitical uncertainty as sources of upward pressure. 

Key Implications

• The July report points to a manufacturing sector that is no longer merely stabilizing, but gaining momentum. New orders are expanding, production has accelerated sharply, backlogs are rebuilding and customer inventories remain thin. That combination suggests factory activity should remain well supported through the summer, particularly if firms need to replenish depleted inventories. 
• The report offers some comfort that growth is firming, but less reassurance that inflation pressures are fully contained. A prices index above 70 still signals broad-based input cost increases, even as employment has returned to expansion and supplier delivery times continue to lengthen. For the rate outlook, that mix argues for caution: stronger manufacturing growth reduces downside risks to the real outlook, but persistent cost pressures keep the bar high for a near-term pivot toward easier policy. 

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