American factory activity held steady last month, with S&P Global’s final U.S. Manufacturing PMI reading 53.9 in July — unchanged from June and comfortably above the 50 mark that divides growth from contraction. The final figure was revised up from the 53.8 flash estimate published July 24, and it extends the sector’s run of expansion to a twelfth consecutive month.

The steadiness of the headline number conceals a more mixed picture underneath it. Output growth cooled to its slowest pace since March, with the Manufacturing Output Index falling to 53.6 from 56.2 in June, a four-month low. New orders rose at the weakest rate in four months. Inventory accumulation slowed sharply after unusually heavy stockbuilding in May and June, when manufacturers were pulling material forward to get ahead of price increases.

Two components pulled the other way and kept the index from slipping. Factory employment rose for the first time in three months — a notable turn after June, when job cuts ran at the fastest pace since May 2020. And supplier delivery times lengthened, which mechanically lifts the headline PMI.

That second point deserves a closer read. Longer delivery times normally signal that demand is outrunning supply, which is a sign of strength. This time the delays traced back to shipping and supply disruptions tied to the conflict in the Middle East. In other words, part of July’s apparent stability came from bottlenecks rather than orders.

What It Costs

Price pressure remains the sore spot. Input cost inflation across the private sector hit a 14-month high in July, and selling price inflation reached its steepest level since August 2022. Services drove the bulk of that increase, but manufacturing input prices stayed elevated on higher raw material and energy costs.

For manufacturers, distributors and contractors across New York, New Jersey and Connecticut, that is the number that shows up on an invoice. A factory sector growing at a 53.9 clip while paying the highest input costs in more than a year describes a margin squeeze, not a boom. Firms that locked in raw material purchases in the spring are in better shape than those buying at current prices.

The energy side may finally be turning. West Texas Intermediate crude fell 6.2% Monday to $79.41 a barrel after the White House shelved a planned strike on Iran in favor of negotiations. If crude holds below $80 through August, the input cost line in next month’s survey should ease — though retail diesel and freight rates lag futures by roughly two weeks, so relief will not show up in transportation bills until late in the month.

Context and Caveats

The survey collected responses from roughly 650 manufacturers between July 9 and July 23, which means the data predates the weekend’s de-escalation news entirely. Business confidence in the flash reading had already climbed to an eight-month high.

The broader composite output index, which blends manufacturing and services, came in at 53.6 for July — its strongest reading in eight months. Services carried that gain, jumping to 53.6 from 51.2 in June, helped by World Cup and Independence Day spending. Chris Williamson, chief business economist at S&P Global Market Intelligence, called it “worrying – though not unexpected – to see manufacturing growth weaken” as prior stockbuilding faded.

One caution on the June comparison: that month’s final figure was revised down hard, to 53.9 from a 55.7 flash estimate. Flash readings are built from roughly 80% to 90% of total responses, and the gap between the June preliminary and final numbers was unusually wide. July’s revision moved the opposite direction, upward by a tenth.

Watch the ISM

The Institute for Supply Management released its own July manufacturing report at 10 a.m. Eastern on Monday, the more widely followed of the two surveys among U.S. policymakers. Consensus called for 54.0, up from 53.3 in June. The ISM prices index will draw the most attention after falling to 73.0 in June from 82.1 in May, the largest single-month drop since July 2022, though still signaling raw material price increases for a 21st straight month. ISM’s employment index sat at 49.7 in June — still in contraction.

Taken together, the two surveys point to a factory sector that is growing but no longer accelerating, carrying cost pressure it cannot fully pass through, and depending in part on supply chain friction that nobody wants. For business owners planning fall inventory, the practical read is that demand is intact and pricing power is not.

JBizNews Desk | Wall Street

© JBizNews.com All Rights Reserved. Reproduction or distribution without written permission is prohibited.