Manufacturing survey shows inflation worries 'worse than pandemic era,' adding to Fed pressure
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- ISM July manufacturing survey posted a 55.6 reading, the fastest growth in over four years and best since May 2022, beating Wall Street expectations of 54.0.
- Production spiked 6.3 points while employment hit its highest since August 2022 — the first expansion in 33 months — led by gains in new export orders and backlogs.
- Prices index edged down only to 71.1, with nearly three-quarters of respondents reporting prices still rising, marking the 22nd straight month of increases well above the Fed's 2% target.
- Manufacturing executives told ISM that pricing volatility and lead-time extensions are "worse than the pandemic era," driven by the Iran war and tariff disruptions.
- Goldman Sachs raised its Q3 GDP tracking to 2.4% following the report, while LPL Financial's Jeffrey Roach projected 2.2% Q3 growth and predicted the Fed will raise rates September 16.
- Federal Reserve held rates at 3.5%-3.75% last week, but traders priced a September hike at 64.5% per CME FedWatch, with analysts arguing the ISM data tilts the scales toward tightening under Chairman Kevin Warsh.
Why it matters: The ISM's split signal — strongest manufacturing growth since 2022 paired with a 22-month streak of price increases — strengthens the case for Fed Chairman Kevin Warsh to break the central bank's year-long rate hold with a September hike, a sharp reversal from the three consecutive cuts that began exactly one year ago.
