Survey Shows U.S. Manufacturing Activity Reaches More Than Four-Year High

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Written by Danny Levin, Deputy Editor for IIR News Intelligence (Sugar Land, Texas)

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Summary

The Institute of Supply Management's (ISM) Purchasing Managers Index showed economic activity in U.S. manufacturing reached its highest level since May 2022. Industrial Info Resources' project data shows strong spending in the U.S. Industrial Manufacturing Industry.

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U.S. Manufacturing Activity Rolls On

The Institute of Supply Management's (ISM) Purchasing Managers Index showed economic activity in U.S. manufacturing reached its highest level since May 2022, with demand indicators showing faster growth. Strong spending in the U.S. Industrial Manufacturing Industry is reflected in Industrial Info Resources' project data.

The PMI, which tracks 18 manufacturing sectors in the U.S., registered 55.6% in July, up from 53.3% in June--indicating faster growth month-over-month. Any reading over 50% indicates expansion in the manufacturing economy. July also marks the seventh month in a row of expansion.

According to Industrial Info Resources data, there is $687 billion worth of projects under construction in the U.S. Industrial Manufacturing Industry; more than half of the investment is attributed to data centers and semiconductors. The Global Market Intelligence (GMI) Project Database offers a full list of projects.

Any reading under 50% indicates contraction in the manufacturing economy.

"We have a really strong report this month," Susan Spence, chair of ISM's Manufacturing Business Survey Committee, said during a news media call.

Three of the four demand indicators--the New Orders, Backlog of Orders and New Export Orders indexes--expanded in July. The New Orders Index expanded for the seventh consecutive month, up 0.7% from June.

In terms of output, July's Production Index jumped 6.3% month-over-month and reached its highest level since November 2021.

In a press release accompanying the survey, Spence said 38% of respondents' comments were positive while 62% were negative, with a 1:1.6 ratio of positive to negative sentiment.

In the call, she acknowledged that "the continued Iran war and remaining price volatility" are still risk factors for manufacturing operations. Survey respondents echoed that sentiment.

Pricing volatility was mentioned in 57% of the negative comments, the Iran war 43%, increasing lead times 22% and tariffs 18%.

Mixed Feelings

Although July's Prices Index, an indicator of input and raw materials costs, continues to show elevated price pressures, the reading of 71.1% lessened from June's 73%.

The elevated index continues to be driven by increases in steel and aluminum prices impacting the entire value chain; tariffs applied to many imported goods; and increases in petroleum-based products as a result of the recent Middle East conflict.

"Demand is up, and prices are up as a result," Spence said. She added that although the list of shortages "is pretty significant" and "certainly could get worse" depending on geopolitical factors, currently "orders are flowing."

The PMI considers shortage items to be specific commodities, raw materials, components, or labor services that are reported to be in short supply or difficult to source.

"Overall, we're definitely optimistic," she said.

A Transportation Equipment survey respondent said, "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."

On a positive note, one respondent from Computer & Electric Products said a favorable demand environment is driven by growth in the semiconductor, artificial intelligence (AI), advanced packaging and high-performance computing (HPC) markets. "Recent company reports indicate strong sales growth and continued investment in manufacturing capacity."

The ISM considers semiconductors and data-center components to be part of the sector.

Strong U.S. Manufacturing Capex

IIR data show data centers account for about 46% of the total investment value of U.S. Industrial Manufacturing Industry projects under construction.

AI cloud infrastructure provider Fluidstack is building out a multi-billion-dollar grassroot data enter in Abernathy, Texas, north of Lubbock. The facility is expected to feature 168 megawatts (MW) of critical load capacity, in order to provide expanded high-performance computing (HPC) support in the region.

Also in Texas, the first building of Google's planned six-building data center campus in Oklaunion, near the Oklahoma border, kicked off in March. Construction is expected to wrap up next year.

Readers can view the two project reports.

IIR's North American Construction Starts Index also shows strong capital spending: The monthly index for the U.S. Industrial Manufacturing industry in June (the latest available data) indicated 1,719 construction starts, with a project value of $209 billion--up from 1,604 projects worth $160 billion year over year.

Key Takeaways

• The ISM's PMI survey shows U.S. manufacturing activity in June reached its highest level since May 2022.
• Three of four demand indicators--including new orders--are growing at a faster rate.
• The Iran war and tariffs still are driving ongoing price pressures for manufacturers.
• $687 billion: value of projects under construction in the U.S. Industrial Manufacturing Industry. About half is attributed to data centers.

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About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, Industrial Info Resources is tracking over 250,000 current and future projects worth $30.2 trillion (USD).