US manufacturing index hits 55.6 in July as inflation worries add pressure on the Fed

The Institute for Supply Management reported a manufacturing index reading of 55.6 in its July 2026 survey, the fastest pace of growth in more than four years, the best since May 2022 and above Wall Street expectations of 54.0. A reading above 50 indicates expansion. New export orders and backlogs led the gains, while the production index spiked 6.3 points. The employment gauge reached its highest level since August 2022 and expanded for the first time in 33 months.

The prices index, however, edged down only to 71.1, meaning nearly three quarters of respondents still reported rising prices, the 22nd straight month that has happened. A respondent in the primary metals sector said pricing volatility and lead time extensions in that market are arguably worse than the pandemic era.

The Federal Open Market Committee last week held its key overnight rate in a range of 3.5% to 3.75%, where it has stood all year. Jeffrey Roach, chief economist at LPL Financial, wrote that demand induced inflation and energy supply shortages will pressure the Fed to raise rates on 16 September. Goldman Sachs said after the report that it is tracking third quarter economic growth at 2.4%.