Economic activity in the US manufacturing sector expanded in July at its fastest rate in more than four years, boosted by expanding production and orders as the Mideast Gulf war kept pricing pressures high.
The Institute for Supply Management (ISM)'s purchasing managers index registered 55.6 in July, up from 53.3 in June, the seventh consecutive month of growth and the highest reading since May 2022. Readings above 50 signal growth, while readings below that level signal contraction.
The production index rose to 58.5 in July from 52.2 the prior month, a ninth month of growth and the highest since November 2021.
"The manufacturing sector has shifted into a higher gear," Oxford Economic said in a note. "Defense and semiconductor-related machinery demand remain the brightest spots, and we expect these sectors to drive growth."
The new orders index rose to 56.7 in July from 56 the prior month, also a seventh month of growth.
New export orders rose to 53 in July, flipping from contraction at 48.5 the prior month.
"Geopolitical risk, especially in the Middle East, pertaining to commodity and energy markets remains a concern," a transportation equipment executive said in an ISM survey response. "There has been some increased cost and transit time for rerouted shipments due to conflicts in the Red Sea, Strait of Hormuz and Suez Canal."
The price index came in at 71.1, falling from 73 but still a 22nd consecutive month of expansion. Aluminum, copper, freight, fuel, metal products, oil-based products, semiconductors, soybean meal and steel products were among commodities that were up in price.
The employment index rose to 52.8 from 49.7 in June, the first expansion in 33 months.
Inventories edged down to 51.2 in July from 51.4, showing slowing growth.
"We are seeing a very opportunistic and reactive marketplace," a chemical products executive said in a survey response. "Some customers are reducing inventory; others are pulling forward demand."
