US manufacturing hits 4-year high, with AI buildout a major driver of growth, though price volatility looms: survey

Manufacturing exercise in July hit a four-year high, with large AI infrastructure investment a major driver of growth — even as industry leaders sounded the alarm over price volatility, according to a survey launched Monday.

The Institute for Supply Management’s July manufacturing gauge jumped to 55.6 – increasing at its quickest tempo since May 2022 and marking its seventh consecutive month of growth, the survey said.

President Trump has called for a return to US manufacturing. REUTERS

Any studying above 50 in the ISM’s month-to-month survey signifies growth while any measure below 50 alerts contraction.

Susan Spence, chair of the ISM Manufacturing Business Survey Committee, said elevated certainty round President Trump’s tariff coverage and hopes for a more everlasting deal to end the war in Iran helped encourage the enhance in manufacturing.

“My gut is, it’s not just a one- or two-month trend,” Spence told reporters. “Companies are seeing six or more months of these solid demand factors going in the right direction.”

The survey’s gauge for manufacturing jumped to 58.5, its highest level since the end of 2021; the employment measure hit 52.8, rising for the first time in almost three years; and new orders growth, which alerts demand, also elevated.

Massive business investments in AI infrastructure helped drive the expansion, together with political stress to ramp up US manufacturing, according to consultants.

Despite the growth in manufacturing, people’ responses to the ISM survey have been overwhelmingly damaging, with many industry leaders calling out price shocks from the Iran warfare and the probabilities that the Fed could raise interest rates next month to counter inflation fears.

“Pricing volatility was mentioned in 57% of negative comments, the Iran war 43%, increasing lead times 22% and tariffs 18%,” Spence said.

Among the survey responses, one metals producer remarked that “it makes me yearn for the coronavirus pandemic chaos, which was more manageable than whatever this is that we are in.”

The Institute for Supply Management’s July manufacturing gauge jumped to 55.6. AFP through Getty Images

Some transportation tools producers lamented elevated prices and transit time “for rerouted shipments due to conflicts in the Red Sea, Strait of Hormuz and Suez Canal.”

Others famous that a spike in demand for sure electronics provides due to the AI race was “challenging on-time fulfillment for our supply chains.”

Jackson Barnes, CEO of Novo, a financial platform for small companies, said the build-out of large AI data facilities is essentially driving manufacturing investments – however that has a lopsided impression on the industry. 

“Look at where the demand is coming from. It’s coming from semiconductors, AI infrastructure and defense. Those are capital-intensive supply chains dominated by large manufacturers,” Barnes told The Post.

Massive business investments in AI infrastructure helped drive the expansion, according to consultants. Getty Images

“That gap shows up clearly in what we see. Across the small manufacturers we work with, the median firm’s quarterly revenue is down roughly 12% from two years ago, even though total volume across that same group is up about 14%.”

Tech giants like Meta and Microsoft have announced deliberate capital expenditures this 12 months of as a lot as $145 billion and $190 billion, respectively, as they ramp up their AI efforts.

Rising oil costs amid the Iran warfare have multiplied prices for almost every producer – and the concern for many in the industry is that the Federal Reserve may soon raise rates of interest as a result, which may hit their growth streak.

Overall, it was a strong report, according to consultants, as all however one manufacturing industry reported growth in July — including electrical tools, home equipment and parts and laptop and digital merchandise. Chemical merchandise marked the only sector that contracted over the month.

“I would say that a lot of the tech investment right now has a lag,” said Amrita Bhasin, co-founder and CEO of Sotira and a manufacturing professional. “There is a lot of money being poured into AI infrastructure and that infrastructure is very resource-intensive.”

“I am optimistic just because we’ve got a lot of factors that are all coinciding at the right time,” Bhasin told The Post.

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