U.S. Manufacturing Sector Contracts in July, ISM Report Reveals
New York, NY – August 1, 2025 – The U.S. manufacturing sector experienced a contraction in July, as indicated by the latest Manufacturing ISM® Report On Business®, released today by the Institute for Supply Management (ISM). The Purchasing Managers’ Index (PMI) registered at 48.0%, a decrease from the previous month’s reading and signaling a slowdown in manufacturing activity.
A PMI reading above 50% generally indicates an expansion in the manufacturing economy, while a reading below 50% signifies a contraction. The July figure of 48.0% suggests that the sector is facing headwinds.
The report highlights several key components that contributed to this overall contraction. The New Orders Index, a crucial indicator of future manufacturing activity, fell to 45.2% in July, down from 48.1% in June. This decline in new orders suggests a weakening demand for manufactured goods.
Production also saw a downturn, with the Production Index decreasing to 46.5% in July, compared to 50.1% in the prior month. This indicates that manufacturers are scaling back their output, likely in response to lower order levels and broader economic conditions.
Customer Inventories were reported as “too high” in July, with the index at 55.1%, an increase from 52.6% in June. This suggests that businesses may be holding more inventory than desired, potentially due to slower sales or anticipation of future demand changes, which can also lead to reduced production.
The Employment Index showed a contraction in manufacturing employment during July, falling to 47.9% from 50.0% in June. This indicates that some companies are reducing their workforce, reflecting the broader slowdown in manufacturing activity.
On a slightly more positive note, the Supplier Deliveries Index registered at 53.3% in July, up from 52.0% in June. While still indicating a slight lengthening of lead times, this suggests that the supply chain may be experiencing some stabilization, though not yet returning to pre-pandemic levels of efficiency.
The Prices Index, which measures the cost of raw materials and supplies, increased to 54.1% in July from 51.3% in June. This rise in prices could put additional pressure on manufacturers’ profit margins and potentially impact consumer pricing.
Comments from survey respondents reflect a mixed sentiment across different manufacturing industries. While some sectors are reporting steady demand and stable operations, others are experiencing significant challenges, including slower sales, increased costs, and a cautious outlook for the near future.
The July Manufacturing ISM® Report On Business® provides valuable insights into the current state of the U.S. manufacturing sector. The contraction indicated by the PMI suggests a period of adjustment for manufacturers, with a focus on managing inventory levels, responding to demand fluctuations, and navigating economic uncertainties. Industry stakeholders will be closely monitoring upcoming reports for signs of potential recovery and stabilization.
Manufacturing PMI® at 48%; July 2025 Manufacturing ISM® Report On Business®
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