Staff Reports
Two closely watched factory surveys landed this week with a welcome headline: U.S. manufacturing is still growing and price pressures at the factory gate are finally cooling. The Institute for Supply Management’s manufacturing PMI read 53.3 and S&P Global’s final reading came in at 53.9. Readings above 50 mean expansion, and both reports show stronger output, higher inventories and a big drop in the prices factories are paying for inputs.
Surveys show growth and cooling factory inflation
The numbers matter. ISM’s new‑orders and production readings stayed well above trend. S&P Global also found output and orders still growing, though a touch softer than the early “flash” read. Most eye‑catching was the ISM prices index, which fell 9.1 percentage points to 73 — the sharpest one‑month drop since mid‑2022. Both surveys link much of the price relief to lower energy costs after tensions in the Middle East eased. In plain English: fuel got cheaper, and that helped factories stop getting punched in the wallet every month.
Mixed signals: employment and the “flash” revision
Not everything is rosy. The two PMIs disagree on employment. ISM’s jobs subindex nudged toward 50 at 49.7, suggesting hiring plans are improving. S&P’s survey, by contrast, showed a steep one‑month drop in manufacturing payroll sentiment. Also worth noting: S&P’s early “flash” PMI was stronger — about 55.7 — before the final 53.9 print arrived. That gap shows why caution matters. Partial, early samples can look glorious one day and more ordinary the next. And a chunk of the growth looks driven by firms topping up inventories — stockpiling, not always steady end‑demand. Export orders are a weak spot too, so this isn’t a full‑blown boom yet.
Why this matters for inflation, jobs and policy
These PMI details are a preview of inflation trends and a peek under the hood of manufacturing health. If factory input prices keep easing, it takes pressure off overall inflation and reduces the temptation for aggressive rate moves. But the gains are fragile. If inventory building fades or export demand stays weak, growth could slow. That’s why policymakers should stop celebrating press releases and start backing real, long‑term fixes: cheaper, reliable energy; tax and regulatory relief that helps plants hire and invest; and smart incentives to bring supply chains home. Give factories fewer hoops and more certainty, and they’ll do the rest.
Conclusion: Progress, not party time
The June PMIs give conservatives something to cheer about: American factories expanding and price pressures easing. But this is not a victory lap. Watch employment, export demand, and whether inventory‑driven gains stick. Lawmakers on both sides should resist blaming or claiming credit and focus on policies that lock in durable manufacturing growth. In the meantime, enjoy the good news — but don’t start rewriting the budget just yet.
