July reignites manufacturing, but services shed jobs

July does not confirm June's rebalancing: growth persists, but becomes divided

In the previous issue we had closed with a picture less robust than May's, yet more orderly: growth still positive, prices cooling and an initial recovery in services employment. July shifts the reading once again — not because the economy is weakening, but because the quality of the cycle is once again becoming less linear.

Manufacturing accelerates decisively. The PMI rises to 55.6, its highest level since May 2022, with output, new orders, backlogs, exports and employment all improving. In services, by contrast, the PMI remains virtually unchanged at 54.1: demand improves, but employment slips back below 50 after just one month of expansion.

In summary, July is a positive month for the cycle, though not an entirely clean one. Activity is growing and demand is holding up, but the labour market is sending two opposing signals. Industry delivers its first genuine confirmation in many months; services, which carry greater weight in the US economy, are once again showing caution on headcount.

Summary

Indicator	Manufacturing	Services	Reading
Headline PMI	55.6 from 53.3	54.1 from 54.0	Industry accelerating, services stable
Output / activity	58.5 from 52.2	59.1 from 55.4	Output significantly stronger across both sectors
New orders	56.7 from 56.0	57.2 from 55.1	Demand remains expansionary
Employment	52.8 from 49.7	47.4 from 51.2	Positive signal in industry, negative in services
Prices	71.1 from 73.0	70.3 from 67.7	Pressures still elevated, more pronounced in services

1. The headline figure: manufacturing shifts gear, services remain resilient

The manufacturing PMI rises to 55.6 — 2.3 points above June. This marks the seventh consecutive month of expansion and the highest reading since May 2022.

The most important aspect is not solely the headline number, but the composition: output at 58.5, new orders at 56.7 and the Employment Index at 52.8. For the first time in a long while, industry is not merely growing in volume terms but is also returning to hiring.

In services the picture is different. The PMI moves from 54.0 to 54.1, remaining in expansion for the twenty-fifth consecutive month, yet without any meaningful acceleration in the overall index. Beneath the surface, however, New Orders improve decisively. The issue is that employment falls to 47.4, and it is for this reason that July cannot be read as a straightforward confirmation of June. The economy continues to advance, but on a more fragile footing.

The cycle remains expansionary, but the quality of growth is diverging: industry stronger, services still alive but less convincing on the labour front.

2. Demand and activity: the engine remains running

Demand is not the weak point of the month. In manufacturing, new orders rise to 56.7 and remain in expansion for the seventh consecutive month. Backlogs also improve markedly, while new export orders return above the 50 threshold. The reading on customer inventories — still too low — remains a supportive factor for future production.

In services, new orders rise to 57.2, marking the fourteenth consecutive month of expansion. Business Activity reaches 59.1, one of the strongest readings of the past two years. This signals that final demand continues to underpin the cycle: companies are receiving orders, operating at pace and maintaining a solid operational rhythm.

ISM Manufacturing New Orders luglio 2026 — Manufacturing New Orders: 56.7% — seventh consecutive month of expansion.

ISM Services New Orders luglio 2026 — Services New Orders: 57.2% — services demand still robust.

3. Employment: this is where the month is decided

The most important development comes from the labour market. In manufacturing, the Employment Index rises from 49.7 to 52.8. This is the first return to expansion in 33 months and the highest reading since August 2022. The report also notes an improvement in corporate sentiment: the ratio of comments relating to hiring versus headcount management or reduction shifts in favour of hiring.

In services, however, the signal points in the opposite direction. The Employment Index falls from 51.2 to 47.4, returning to contraction after just one month above the 50 threshold. The reading is below the 12-month average and is the weakest since March. Furthermore, the index has been below 50 in 12 of the last 18 months. The June reading is therefore not confirmed.

ISM Manufacturing Employment luglio 2026 — Manufacturing Employment: 52.8% — first month of expansion after 33 months.

ISM Services Employment luglio 2026 — Services Employment: 47.4% — return to contraction following June's recovery.

4. Prices: relief in manufacturing, renewed pressure in services

The price picture remains uncomfortable. In manufacturing, the Prices Index falls from 73.0 to 71.1. This is the third consecutive monthly decline and confirms an easing from the spring peaks. However, the level remains elevated, particularly as raw material prices increase for the twenty-second consecutive month.

In services, by contrast, the Prices Index rises to 70.3. This is the fourth reading above 70 in the last five months, and the index has remained above 60 for the twentieth consecutive month. The report continues to flag pressures on petroleum products, plastics, transportation, software, components and skilled labour. Some raw materials, such as copper and aluminium, are also showing declines, but the overall signal on costs remains elevated.

For the Federal Reserve, then, July does not simplify the picture. Manufacturing improves, but services weakens again on employment and heats up further on prices. This is not a recessionary report. But nor is it a report that closes the book on cost-driven inflation.

ISM Manufacturing Prices luglio 2026 — Manufacturing Prices: 71.1% — third monthly decline, but pressures still elevated.

ISM Services Prices luglio 2026 — Services Prices: 70.3% — renewed rise back above the 70 threshold.

5. Our sector tracker reading

In the manufacturing tracker, the cleanest improvement comes from new orders. Electrical Equipment returns to the upper end of the rankings, while Nonmetallic Mineral Products, Apparel, Printing, Plastics & Rubber Products, Primary Metals, Machinery, Transportation Equipment and Computer & Electronic Products remain constructive areas. Printing confirms continuity following May and June; Machinery and Transportation Equipment continue to show positive demand; Computer & Electronic Products remains above the positive threshold, albeit with somewhat less intensity.

From an employment standpoint, the picture improves but not uniformly. Printing remains positive, Miscellaneous Manufacturing accelerates, Transportation Equipment continues to hold, and Computer & Electronic Products returns to confirmation. Food, Beverage & Tobacco Products also moves into positive territory. Conversely, Fabricated Metal Products, Nonmetallic Mineral Products, Plastics & Rubber Products, Chemical Products and Machinery revert to the weaker part of the employment picture. The headline signal is strong, but sector-level confirmation still warrants selective assessment.

Tracker settoriale Manufacturing New Orders luglio 2026 — Manufacturing Tracker — New Orders: the demand side remains the most orderly component of the industrial picture.

Tracker settoriale Manufacturing Employment luglio 2026 — Manufacturing Tracker — Employment: first positive signal on the headline index, but distribution across sectors remains selective.

In services, the tracker reveals a different dynamic. Demand remains solid and fairly broad-based: Management of Companies & Support Services rebounds strongly, Transportation & Warehousing remains among the top-performing areas, Retail Trade accelerates, Mining stays elevated, and Accommodation & Food Services and Information confirm a sound underlying structure. Wholesale Trade and Finance & Insurance also remain positive, albeit with less intensity than in previous months.

The problem is employment. Construction, Utilities, Retail Trade, Transportation & Warehousing, Wholesale Trade, Information, and Public Administration remain or return to positive territory. But Finance & Insurance drops sharply, Health Care & Social Assistance turns negative again, Real Estate falls back into contraction, Professional Services moves from a strong reading to a weak signal, and Management of Companies remains below zero. This is the most fragile point of the month: services have demand, but are not converting that demand into jobs.

Tracker settoriale Services New Orders luglio 2026 — Services Tracker — New Orders: demand remains broad-based, with relative strength in Management, Transportation, Retail, Mining, and Accommodation.

Tracker settoriale Services Employment luglio 2026 — Services Tracker — Employment: the weakness in the headline index stems from a far less widespread confirmation of hiring.

6. Operational Conclusion

July is a better month for manufacturing and a more challenging one for services. Industry accelerates, resumes hiring, and shows demand that remains solid. Services stay in expansion territory, improve on activity and new orders, but once again lose ground on employment and see prices edge higher.

The overall reading is not negative. The US economy continues to grow and demand shows no signs of breaking down. However, normalisation remains incomplete. After June, the expectation was for confirmation of a rebalancing among activity, employment, and prices. July delivers only a partial confirmation.

The key data point to watch in the next issue will be clear-cut: if the Services Employment Index returns above 50, July can be read as a temporary correction. If it remains in contraction, the divergence between demand and employment will once again become the central theme of the American summer.

Source: ISM Manufacturing PMI® Report and ISM Services PMI® Report, July 2026 data; internal sector tracker updated with available monthly data. Empty cells in the tracker are treated as missing data, not as zero values.