What we can take away from the Institute for Supply Management (ISM) index on manufacturing [Data Here]: overall, the U.S. manufacturing sector is continuing to expand significantly.  The current index of 55.6 percent in July is 2.3 percentage points above the June figure and the highest reading since May 2022 (55.9 percent), when we were trying to recover from the COVID-19 shutdowns and supply chain problems.

PMI – The overall economy continued in expansion for the 21st month in a row. (A Manufacturing PMI^® above 47.5 percent, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index expanded for the seventh consecutive month after four straight readings in contraction, registering 56.7 percent, up 0.7 percentage point compared to June’s figure of 56 percent.

The July reading of the Production Index (58.5 percent) is 6.3 percentage points higher than the 52.2 percent recorded in June and the highest figure since November 2021 (60.5 percent). The Prices Index remained in expansion (or ‘increasing’ territory), registering 71.1 percent, a 1.9-percentage point decrease from June’s reading of 73 percent. The Backlog of Orders Index registered 55 percent, up 4.5 percentage points compared to the 50.5 percent recorded in June.

The Employment Index reading of 52.8 percent is up 3.1 percentage points from June’s figure of 49.7 percent, putting the index in expansion territory for the first time in 33 months.” (source)

All that data and a couple of bucks will buy you a cup of coffee, but here’s what it means in common speak.

Overall, companies wanting to make products in the United States are expanding the manufacturing sector.  However, they are running into a problem when trying to source the component goods and/or raw materials.  The resource goods they need are constantly in a status of flux and the prices are unstable.

For large companies their supply chain management can deal with the short inventory issue through various sourcing networks using multiple suppliers.  However, for smaller companies this is frustrating.

The manufacturing system is a network of complex suppliers who make component materials needed for the core product.  In order to get really successful, the smaller manufacturing component goods need to start up inside the USA just like the larger companies who are producing a finished product.

This is why even during a manufacturing surge we end up importing a lot of goods on the front end of the transition.  Absent a domestic supplier, industrial component products are heavily imported in order to manufacture the finished durable good.

It takes time, well, technically its never been tried – so, no one is sure, but it takes time for all of the component manufacturing to establish inside the USA in order to feed the component parts to the various manufacturers who depend on the sub-sourcing.  This is the period we are in at the moment, and prices are fluctuating as people try to get their arms around costs here and abroad.

The 15 manufacturing industries reporting growth in July — listed in order — are: Printing & Related Support Activities; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Primary Metals; Nonmetallic Mineral Products; Transportation Equipment; Miscellaneous Manufacturing; Textile Mills; Machinery; Computer & Electronic Products; Food, Beverage & Tobacco Products; Wood Products; Plastics & Rubber Products; Furniture & Related Products; and Fabricated Metal Products. The only industry in contraction was Chemical Products.

[…] Commodities Up in Price
Acrylonitrile Butadiene Styrene (ABS); Aluminum* (32); Copper (13); Corn; Corrugated Products (4); Electrical Components (2); Electronic Components (7); Freight (5); Fuel* (5); Integrated Circuits; Memory Components (5); Metal Products (4); Ocean Freight (3); Oil Based Products (4); Paper Products (4); Plastic Based Products (4); Plastics (5); Printed Circuit Boards; Resin Based Products; Resins (6); Semiconductors (2); Soybean Meal; Steel (9); Steel — Cold Rolled; Steel — Hot Rolled (7); Steel — Stainless (6); Steel Products (8); and Sulfur Products (4).

Commodities Down in Price
Aluminum*(2); Fuel* (2); and Polypropylene Resin (2).

Commodities in Short Supply
Aluminum; Copper; Electrical Components (13); Electronic Components (17); Integrated Circuits; Memory (7); Oil Based Products; Printed Circuit Boards; Rare Earth Components; Semiconductors (5); Steel; Steel — Hot Rolled (2); and Tungsten Products.

The blue-collar jobs are expanding significantly.  There is massive upward pressure on wages for blue collar workers as the manufacturing sector continues to expand.