- KPI – August 2026: The Brief
- KPI – August 2026: State of Business – Automotive Industry
- KPI – August 2026: State of the Economy
- KPI – August 2026: Consumer Trends
- KPI – August 2026: Recent Vehicle Recalls
In July, economic activity in the manufacturing sector expanded for the seventh consecutive month, according to the nation’s supply executives in the latest ISM Manufacturing PMI Report. The Manufacturing PMI registered 55.6% in July, 2.3 percentage points above the June figure and the highest reading since May 2022 (55.9%).
“In June, U.S. manufacturing activity remained in expansion territory, growing at its fastest rate in more than four years. Of the five subindexes that make up the PMI, four grew faster compared to the previous month; the exception was the Inventories Index, which was down just 0.2 percentage point,” says Susan Spence, MBA, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee.
Data shows 20% of the sector’s gross domestic product (GDP) contracted in July, compared to 5% in June; however, no share of manufacturing GDP was in strong contraction (defined as a composite PMI of 45% or lower), compared to 3% in June.
“The share of sector GDP with a PMI at or below 45% is a good metric to gauge overall manufacturing weakness. Of the six largest manufacturing industries, four (Transportation Equipment; Machinery; Computer & Electronic Products; and Food, Beverage & Tobacco Products) expanded in July,” Spence says.
Important Takeaways, Courtesy of the Manufacturing ISM Report On Business:
- Three of four demand indicators (the New Orders, Backlog of Orders and New Export Orders indexes) were in expansion, and the Customers’ Inventories Index remained in “too low” territory, contracting at a faster rate. A “too low” status for the Customers’ Inventories Index is usually considered positive for future production.
- Regarding output, the Production Index expanded for the ninth month in a row, and the Employment Index increased 3.1 percentage points to enter growth territory for the first time in 33 months. Sixty percent of panelists reported their companies are hiring, while 40% indicated that managing headcounts remains the norm.
- Inputs—defined as supplier deliveries, inventories, prices and imports—were mixed, with the Supplier Deliveries Index increasing 1.5 percentage points; the Inventories Index declining 0.2 percentage points but staying in expansion; and Prices Index relief continuing with the third straight month-over-month decrease, from 73% in June to 71.1%.
What Respondents Are Saying:
- “We are seeing a very opportunistic and reactive marketplace. If shortage items become available, we opportunistically buy. Some customers are reducing inventory, while others are pulling forward demand. As many customers that are slowing down, an equal number are growing. It looks like a lot of shuffling and shifting market share.” [Chemical Products]
- “We continue to operate in a favorable demand environment driven by growth in the semiconductor, AI, advanced packaging and high-performance computing markets. Recent company reports indicate strong sales growth and continued investment in manufacturing capacity, technology and customer-support capabilities. This scenario supports a positive business outlook and creates opportunities to leverage increased purchasing scale across the enterprise.” [Computer & Electronic Products]
- “Now that it seems the buildout of AI infrastructure globally is nearing real activation, products going into data centers are at full procurement and manufacturing ramp-up. Thus, demand for our semiconductor end products and connectivity (power, networking and photonics) is booming. Similarly, defense is at an all-time high, with most of our product orders going to these two industries. Order volumes for medical, industrial and consumer products are markedly lower.” [Machinery]
- “Aerospace and defense demand continues to be strong and growing, based on business backlogs. Competing for scarce supply—electronics, certain critical minerals and other categories—is challenging on-time fulfillment for our supply chains. This is expected to get worse with co-dependent sectors also remaining strong and restocking challenges for automotive electronics.” [Transportation Equipment]
- “Continued tariffs on products utilized in our product lines are being monitored by the business, which is working to mitigate or limit tariff risk. Geopolitical risk, especially in the Middle East, pertaining to commodity and energy markets remains a concern. 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.” [Transportation Equipment]
- “Business is still solid; we will increase revenue by 3%-5%. We are considering foreign steel purchases for early next year because domestic steel mills are getting greedy.” [Fabricated Metal Products]
- “No normalcy in sight in the world of metals. It makes me yearn for the coronavirus pandemic chaos, which was more manageable than whatever this is that we are in. At least business is better; however, the components of good business are not. Sharp pricing downturns in aluminum will make things more interesting, as supply levels will prevent those decreases from taking hold across the board. Getting customers to understand that is not always easy.” [Primary Metals]
- “The pricing volatility and lead-time extensions in this market are arguably worse than the pandemic era. During COVID-19, we saw a surge of price hikes and inventory buy-ups, which caused constraints that eventually leveled out. We are seeing nothing but consistent upward trends for both pricing and lead times that show no signs of slowing down. Specifically, 5%-25% price increases for printed circuit board assembly components and 15%-45% increases for bare boards are negatively impacting customer demand outlook into next year. This isn’t sustainable.” [Electrical Equipment, Appliances & Components]
- “Our customers in Asia continue to procure elsewhere to avoid paying a tariff. While the Iran war was paused, it was terrific to see fuel prices (and delivery costs) falling steadily. Now that skirmishes have resumed, we expect fuel to rise again.” [Paper Products]
- “Definitely a downturn within several of our business units, mainly the consumer products division. High freight costs, both for truck and ocean, and longer lead times are concerning. Pricing was moving downward until the Iran war started again.” [Chemical Products]
