US Manufacturing Sees Strongest Expansion In More Than 3 Years: S&P Global

Factories report fastest growth since May 2022, led by domestic demand and inventory building, per S&P Global, though ISM data pointed to weakness in output.

Louisville Mayor Craig Greenberg (R) tours the laundry production line at Appliance Park, headquarters of GE Appliances, in Louisville, Ky., on Aug. 13, 2025. Michael Hickey/Getty Images for GE Appliances

U.S. manufacturing recorded its strongest pace of growth in more than three years in August, according to S&P Global, even as a separate survey from the Institute for Supply Management (ISM) underscored lingering weakness in production and employment.

S&P Global’s manufacturing purchasing managers’ index rose to 53, its highest reading since May 2022, the group announced on Sept. 2. The reading signals a solid expansion in factory activity after a period of uneven performance.

“US manufacturing was running hot over the summer,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement. “The past three months have seen the strongest expansion of production since the first half of 2022, with the upturn gathering pace in August amid rising sales.”

Firms reported a jump in new orders—primarily from domestic clients—and stepped up hiring to keep up with workloads. Demand in the form of new work placed at U.S. manufacturers rose for the eighth month straight, with part of the surge in factory activity associated with building up stockpiles.

“The upturn is in part being fueled by inventory building, with factories reporting a further jump in warehouse holdings in August due to concerns over future price rises and potential supply constraints,“ Williamson said. ”These concerns are being stoked by uncertainty over the impact of tariffs, fears which were underpinned by a further jump in prices paid for inputs by factories.”

Input cost inflation continued to filter through supply chains, accelerating in August at its second-fastest pace in three years. The survey also pointed to a rapid rise in selling prices, which were lower than June’s three-year record but remained “well above trend,” as producers passed on higher costs to clients wherever possible.

Confidence about future output also improved in August, with domestic demand seen picking up in the year ahead. Planned investments in new plants and product lines were also noted among some manufacturers, according to the report.

“The manufacturing sector is therefore on course to provide a boost to the US economy in the third quarter,” Williamson said.

The U.S. economy grew at a 3.3 percent annualized pace in the second quarter, according to recently revised estimates, while the Atlanta Federal Reserve’s real-time GDP projection for the third quarter currently stands at 3 percent.

Other data on trade flows pointed to firm underlying demand in the manufacturing sector. Imports of industrial supplies increased by 25 percent in July, swelling the U.S. goods trade deficit but highlighting a robust appetite for fuel, chemicals, and raw materials as factories geared up to meet a rising number of orders.

Meanwhile, a separate factory activity gauge told a somewhat softer story than the S&P Global data. The ISM’s headline manufacturing activity index edged up to 48.7 in August from 48 in July. While that was an improvement that pointed to an uptick in manufacturing, the below-50 reading marked the sixth straight month in contractionary territory, pointing to stabilization rather than a full recovery.

“Looking at the manufacturing economy, 69 percent of the sector’s gross domestic product (GDP) contracted in August, down from 79 percent in July,” Susan Spence, chair of the ISM manufacturing business survey committee, said in a statement.

The ISM report offered some brighter signals: The new orders index climbed to 51.4, ending a six-month slide, and customers’ inventories dropped further into “too low” territory at 44.6—an often-positive sign for future production. But production and employment both contracted, and the prices index held at an elevated 63.7, consistent with rising input costs.

“ISM manufacturing new orders finally moved into expansionary territory in August after six straight months of decline,” Peter Berezin, chief global strategist at BCA Research, said in a post on X. “This is the most forward-looking component of the index.”