US Manufacturing Sees Fastest Growth in Four Years

The Institute for Supply Management reported that U.S. manufacturing activity grew at its fastest rate in more than four years during July 2026. The Manufacturing Purchasing Managers' Index rose 2.3% over June to 55.6%, marking the 21st consecutive month of economic expansion and the strongest performance since May 2022. Production reached its highest level since November 2021, supported by strong demand for semiconductors, AI data centers, electronics, and defense. Notably, the sector saw its first employment expansion in 33 months.

Despite the growth, a sharp divergence appeared in industry data. While the ISM reported a surge, S&P Global reported a flatter expansion rate of 53.9%, warning of supply chain disruptions and the sharpest deterioration in vendor performance in four years. S&P Global noted that business optimism has fallen to the lowest level since October 2025 due to high energy prices, tariffs, and falling exports.

Industry sentiment remains strained, with 62% of survey respondents expressing negative views. Many managers described current pricing volatility and lead-time extensions as more severe than those experienced during the COVID-19 pandemic, citing the Iran war and tariffs as primary drivers. This persistent inflation is increasing pressure on Federal Reserve Chairman Kevin Warsh and the Federal Open Market Committee to raise interest rates at their September 15-16 meeting, following a July decision to hold rates between 3.5% and 3.75%.