Manufacturing Purchasing Manager Index Shows Decline at an Accelerated Pace in July's Report
In July 2025, the ISM Manufacturing PMI registered a reading of 48.0, indicating a faster contraction of manufacturing economic activity compared to June. This contraction is primarily driven by ongoing weakness in new orders and employment.
- New Orders Remain in Contraction
The new orders index continued to contract but at a slower rate, with a reading of 47.1% in July. This weak forward-looking indicator signals subdued future manufacturing activity.
- Employment Index Falls Further
The employment index fell further to 43.4, suggesting ongoing reductions or limited hiring in manufacturing firms. Survey respondents note firms continue to manage headcount cautiously rather than expand payrolls, reflecting uncertainty in demand.
- Backlog of Orders Remains in Contraction
The backlog of orders remains in contraction at 46.8, albeit slightly improved from June, showing that unfilled orders are not building, reinforcing subdued demand conditions.
- Supplier Deliveries Index Declines
The supplier deliveries index declined (faster deliveries at 45.7), which, combined with contracting new orders and backlogs, reflects reduced supplier constraints but also less pressure to push new goods through the pipeline.
- Price Pressures Remain Elevated
Price pressures remain elevated but eased from June, with the Prices Index at 64.8%, reflecting ongoing commodity and raw material cost inflation, which can constrain manufacturing margins and investment.
- Production Gains Modestly
Despite the overall contraction, production did rise modestly (51.4), indicating some manufacturing output growth. However, this was not enough to offset the broader weakness in new orders and employment.
Industries such as plastics & rubber products, nonmetallic mineral products, textile mills, miscellaneous manufacturing, furniture & related products, primary metals, and the apparel, leather & allied products industry have reported concerns about tariffs and uncertainty. In the machinery sector, tariff policies are uncertain, which slows down investment in new projects, component sourcing for new products, blanket orders, and replenishment of large inventory quantities.
Layoffs were the primary measure of staff shrinking in July, with the employment index dropping 1.6 points to 43.4%. On the other hand, the production index gained 1.1 points for a July reading of 51.4%.
This marks the fifth consecutive month of contraction in the sector since February 2025, after a prior uptrend in 2024. Only one of the five subindexes directly affecting the Manufacturing PMI, production, is in expansion territory. The continued contraction highlights the need for policy interventions to stimulate demand and alleviate the pressure of elevated input prices on the manufacturing sector.
[1] ISM Report on Business®: Manufacturing, Institute for Supply Management, July 2025. [2] Manufacturing ISM Report On Business, Thomas Net, July 2025. [3] U.S. Manufacturing PMI, IHS Markit, July 2025. [4] The Wall Street Journal, U.S. Manufacturing Slows in July, Data Show, July 2025.
- The ongoing challenges affecting the manufacturing sector, such as the concerns about tariffs and uncertainties in the machinery sector, have caused a slowdown in investment in new projects and the sourcing of components for new products.
- In response to the prolonged contraction in the manufacturing sector, there is a pressing need for policy interventions to stimulate demand, alleviate the pressure of elevated input prices, and support the finance necessary for industries to expand and invest in operation growth.
