U.S. factories expand, but orders and supply costs remain uneven
U.S. manufacturing entered August with its strongest survey reading in more than four years, but government data released Tuesday showed that factory orders and shipments weakened in June. Together, the reports point to a sector gaining momentum while still facing supply delays, elevated costs and uneven realized demand.
The Institute for Supply Management said its Manufacturing PMI rose to 55.6 in July from 53.3 in June. It was the seventh consecutive month of expansion and the highest reading since May 2022. The PMI is a survey-based measure of operating conditions reported by supply executives, not a direct measure of factory output.
The Census Bureau’s separate report, released August 4 and covering June, showed new orders for manufactured goods fell 0.3% to $656.5 billion. Shipments declined 0.2% to $652.1 billion after six consecutive monthly increases. The figures measure different months and different aspects of activity, so they are not contradictory: ISM captures current business conditions, while Census records dollar-valued orders, shipments, inventories and unfilled orders. The Census estimates are subject to revision.
What improved in July
Several ISM measures strengthened. The Production Index climbed 6.3 points to 58.5, its highest reading since November 2021. The New Orders Index reached 56.7, while the Backlog of Orders Index rose to 55.0.
The Employment Index returned to expansion at 52.8, the first expansion reading in 33 months. Four of the six largest manufacturing industries reported growth: transportation equipment, machinery, computer and electronic products, and food, beverage and tobacco products. Chemical products were the only industry reporting contraction.
The survey suggests manufacturers are seeing stronger demand in parts of the economy, particularly in areas tied to machinery, transportation equipment and electronics. It does not show that all factories or industries are expanding equally, and it is not a substitute for official production or shipment data.
Supply-chain pressure has not disappeared
Supplier deliveries slowed for an eighth consecutive month. The Supplier Deliveries Index rose to 58.9; readings above 50 indicate slower deliveries rather than faster ones.
Customers’ inventories remained unusually low, with the index at 40.7. ISM generally views low customer inventories as supportive of future production because businesses may need to restock. But the same condition can leave manufacturers and retailers more exposed to delays if demand rises faster than supplies arrive.
Raw-material costs remained a major concern. The ISM Prices Index was 71.1, indicating that input prices increased for the 22nd consecutive month, although the reading eased from 73.0 in June. Survey respondents reported price or supply concerns involving electronics, semiconductors, copper, aluminum, steel, freight and other materials.
Imports also increased, with the Imports Index rising to 55.7. ISM’s comments about tariffs, freight routes, geopolitical conditions and shortages reflect respondents’ observations; they do not independently establish a single cause for the sector’s cost and delivery problems.
What the Census data add
The Census report showed that unfilled orders increased 0.6% in June to $1.5906 trillion. The unfilled-orders-to-shipments ratio edged down to 6.86 from 6.90 in May, indicating that the value of shipments rose slightly relative to the backlog even as total unfilled orders increased.
Inventories increased 0.1% to $962.9 billion, extending a nine-month run of gains. The inventories-to-shipments ratio rose to 1.48 from 1.47 in May.
More unfilled orders can support future production, but they do not guarantee that goods will be made, shipped or delivered on schedule. Higher inventories can help businesses manage disruptions while also tying up cash and increasing storage costs.
What it means for workers, businesses and consumers
Manufacturers and suppliers are entering August with stronger production and hiring signals. Businesses managing inventories, however, still face longer lead times and expensive inputs. Consumers may feel the effects indirectly through product availability, delivery times and prices rather than through an immediate nationwide change.
The next test will be whether July’s survey strength appears in later Census shipments and orders data. The next government full report, scheduled to cover July, will provide a more direct check on whether the survey momentum translated into realized factory activity. Revised Census figures, future employment data and producer-price reports will also help show whether the improvement is broadening or remaining concentrated in selected industries.
The latest evidence supports a measured conclusion: the factory recovery is real in the ISM survey, but its durability depends on converting stronger production and orders into sustained shipments without worsening delivery constraints and input-cost pressure.
Sources
- Institute for Supply Management: July 2026 Manufacturing PMI
- U.S. Census Bureau: June 2026 Factory Orders Report
- Reuters: U.S. manufacturing activity jumps to more than four-year high in July
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