The U.S. manufacturing sector is expanding at the strongest pace in four years as output surges, firms add workers, and demand continues to grow, according to a key measure of factory health released Monday.
The Institute for Supply Management’s July barometer of U.S. manufacturing rose to 55.6, the highest since May 2022. This was the seventh consecutive month in which the sector’s reading came in above the threshold of 50 that separates growth from contraction. The reading was higher than economists had forecast.
The employment gauge indicated payroll growth for the first time since September 2023. New orders expanded for the seventh straight month. The measure of production rose to its best reading since late 2021.
Out of the 16 industrial categories measured by ISM, only chemical products was in contraction in July. That sector includes fuel production and the contraction is likely related to the sharp drop in gasoline prices.
Manufacturing has been gaining strength this year as the Trump administration’s tariffs have refocused businesses on domestic production and away from offshoring. The AI investment boom is also fueling demand. Changes to the tax code made last year, including the ability to expense capital investments made by businesses, are also giving a lift to the sector.
“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,” one machinery manufacturer told ISM.
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