US Flash PMI: Growth accelerates in July as rising demand for services offsets manufacturing dip
The headline S&P Global US PMI Composite Output Index rose sharply from 52.9 in June to 54.6 in July, according to the ‘flash’ reading (based on about 85% of usual survey responses). The latest reading signalled the fastest rate of growth recorded so far this year, with output having now increased continually for 30 months.
July’s expansion was powered by the services economy, where business activity rose at a rate not seen since last December. Although manufacturing output also rose, up for a second successive month, the rate of production growth moderated to signal only a modest expansion.
New orders growth also accelerated to match the pace seen back in May, albeit with an improvement in new business inflows into the service sector being offset by the first (albeit marginal) drop in factory orders recorded so far this year. In both cases, total new orders were adversely impacted by a fall in exports, which collectively fell for the third time in the past four months and at the sharpest rate since April.
While service providers saw improved domestic demand from both households and businesses, the renewed drop in demand in the manufacturing sector was often attributed to tariffs, higher prices and heightened economic uncertainty.
The deteriorating manufacturing picture was also linked to inventory control. Having built up their inventories of both raw materials and finished goods in May and June, often attributed to factories and their customers seeking to front-run tariffs, manufacturers reported lower stock holdings in both cases during July. Purchasing of inputs likewise rose at a sharply reduced rate amid reduced reports of the need to front-run potential tariff hikes on imported goods. Supplier deliveries quickened as a result of the reduced pressure on supply chains.
Price pressures intensified across both manufacturing and service sectors during July, widely blamed on higher goods prices due to tariffs but also in some cases due to rising labor costs. Average prices charged for goods and services rose at a rate just shy of May’s recent high to register the second-strongest monthly increase since September 2022.
Services price inflation accelerated to register the second-steepest increase since April 2023 and, although factory gate selling price inflation eased, the rise in charges for manufactured goods was the second largest since November 2022.
Input cost inflation also picked up again, having eased slightly in June, registering the second-steepest rise since January 2023. The rate of input cost inflation remained especially sharp in manufacturing, despite cooling compared to June’s post-pandemic peak, and accelerated in services.
Close to two-thirds of all manufacturers reporting higher input costs attributed these to tariffs, whilst just under half of respondents explicitly linked their increased selling prices to tariffs. However, the tariff impact was by no means limited to factories, as around 40% of service providers reporting higher selling prices explicitly mentioned tariffs.
Employment rose for a fifth straight month as companies took on additional staff in response to rising backlogs of work. Uncompleted orders rose at a pace not witnessed since May 2022.
However, these trends varied markedly by sector. Backlogs rose at the steepest rate for over three years in the services economy as firms struggled to meet demand, despite reporting the largest gain in payroll numbers since January. In contrast, manufacturing backlogs fell, causing a drop in factory payrolls for the first time in three months.
Companies’ expectations about output in the year ahead fell for a second successive month in July, dropping further below the survey’s long-run average amid declines in both manufacturing and service sector confidence. Although optimists continued to outnumber pessimists, sentiment in July was the lowest recorded for just over two-and-a-half years bar only April’s recent nadir.
Reduced optimism again primarily reflected broad-based concerns over tariffs and cuts to state funding following recent federal government policy changes. Even in manufacturing, any protectionist benefits of import tariffs were often outweighed by concerns over higher prices and rising costs.
The S&P Global Flash US Manufacturing PMI fell to 49.5 in July, down from June’s 37-month high, signaling a renewed deterioration of factory business conditions for the first time since December.
Production growth slowed as new orders placed at factories fell for the first time this year. Both employment and inventories of purchases also dropped for the first times since April. Supplier delivery times meanwhile quickened for the first time since September last year, improving to the greatest extent for 17 months in a sign of less-busy supply chains (and hence also pulling the PMI lower).
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence:
“The flash PMI data indicated that the US economy grew at a sharply increased rate at the start of the third quarter, consistent with the economy expanding at a 2.3% annualized rate. That represents a marked improvement on the 1.3% rate signalled by the survey for the second quarter.
“Whether this growth can be sustained is by no means assured. Growth was worryingly uneven and overly reliant on the services economy as manufacturing business conditions deteriorated for the first time this year, the latter linked to a fading boost from tariff front-running.
“Business confidence about the year ahead has also deteriorated in both manufacturing and services to one of the lowest levels seen over the past two-and-a-half years. Companies cite ongoing concerns over the impact of government policies, notably in terms of both tariffs and cuts to federal spending.
“Inflation pressures have meanwhile intensified. Companies most commonly attributed higher costs and selling prices to tariffs, though increased labour costs are also prevalent, in part reflecting labor shortages.
“The rise in selling prices for goods and services in July, which was one of the largest seen over the past three years, suggests that consumer price inflation will rise further above the Federal Reserve’s 2% target in the coming months as these price hikes feed through to households.”
Trump’s Tariffs Are Being Picked Up by Corporate America Neither consumers nor foreign countries are assuming much of the tariff burden. At least not yet.
The U.S. has collected an additional $55 billion in tariffs this year. Corporate America has largely shouldered the bill. (…)
It is becoming increasingly clear that U.S. businesses, from General Motors and Nike to the local florist, are absorbing much of the costs for now. In a competitive market, a company that hikes prices could lose market share to a rival that keeps its prices steady. Many are reluctant to raise prices until they absolutely must, and until they know the ever-changing tariffs are sticking around. In some cases companies have said they plan to raise prices in the months to come. (…)
Inflation has begun to tick up for some tariffed goods, including furniture, toys and clothes. So far those increases have been relatively mild. The June inflation reading moved to 2.7% from a year earlier, versus a 2.4% increase in May. The increase has been slower than expected partly because many companies pulled back on buying or stocked up on inventory before tariffs took effect, and partly because companies are choosing to absorb the hit for now. (…)
General Motors said this week it paid more than $1 billion in tariffs on automotive imports in the second quarter. The company hasn’t implemented wide-scale price increases in response to tariffs but hasn’t ruled out price hikes, Chief Executive Officer Mary Barra said Tuesday. Stellantis, the Netherlands-based parent of the U.S. brands Ram and Jeep, this week said tariffs on automotive imports cut $350 million from its bottom line.
Tariffs clipped the profit of RTX, the aerospace and defense company said. The toy maker Hasbro said Wednesday that the financial impact of tariffs was less than expected in the most recent quarter, but that some of the effects could still be coming. Tariffs will likely create a $60 million expense for the full fiscal year, the company said.
Toy prices are likely to go higher later this year, Hasbro Chief Executive Chris Cocks said. “Usually it takes five to eight months for a toy to go from the factory to the shelf,” he said. For now some retailers are delaying their purchases, and Hasbro is compensating for higher tariff costs through cost cuts, working with new suppliers, introducing new products and increasing prices, he said.
Last month, Nike executives said tariffs would trim the company’s profit by around $1 billion this fiscal year, with most of the hit in the first half, before their mitigation efforts can take effect. “Surgical” product price increase will flow to shelves later this year, said Matthew Friend, Nike’s chief financial officer.
Economists estimate the effective average tariff rate on all imported goods is now nearing 17%, up from 2.3% last year. (…)
Goldman Sachs conducted what it called a more granular analysis of import prices and concluded that foreign companies, particularly those in China, appear to be absorbing around 20% of tariff costs through price cuts. (…)
In May, Walmart said that it had started raising some product prices to offset the cost of tariffs and that more price increases would come this summer. (…)
Shayai Lucero, a florist near Albuquerque, N.M., is swallowing some of the extra cost of tariffs, while also raising prices. The imported long-stem roses from South America she buys from U.S. wholesalers used to cost $1.15 to $1.35 each but are now running $1.95 to $2.15 apiece. That has forced her to raise her price for a vase of a dozen roses to $69 from $60, she said.
The floral wreaths and foam she imports from China have also climbed in price since Trump added 30% tariffs on those imports. A heart-shaped wreath from China that used to cost $24 recently jumped to $38. That and higher flower prices cut the profit on an arrangement she recently made for a funeral to $6 from $30, she said.
She worries that higher prices could lead to lost business. “It’s that real fine line of do I lose customers or do I stay in business?” she said. (…)
Some footwear companies have announced plans to increase prices in the coming weeks, said Matt Priest, CEO of the Footwear Distributors and Retailers of America, a trade association.
“A lot of the impact has so far been absorbed by the brand and the retailer, but they can only hold on for so long,” Priest said of his member companies. About 99% of shoes sold in the U.S. are imported from China, Vietnam, Italy and other countries.
From my July 18 post:
Some import prices: last 3m a.r., June YoY (%)
- All imports excluding food and fuels: 3.3 1.0
- Industrial supplies & materials excluding fuels: 3.7 4.3
- Industrial supplies & materials, durable: 8.5 5.7
- Unfinished metals related to durable goods: 13.0 5.7
- Finished metals related to durable goods: 19.3 12.3
- Capital goods: 3.6 1.0
- Automotive vehicles, parts & engines: 0.8 0.9
- Nondurables, manufactured: 1.6 -1.2
- Durables, manufactured: 2.0 –0.1
The consumer side has been spared for the most part so far (last 3 lines) but there is acceleration. Industrial prices are exploding. Remember, import prices do not include tariffs.
The Harvard Business School Pricing Lab uses real-time online pricing data from four major U.S. retailers to track the prices of more than 300,000 products by country of origin.
The lab monitors goods from Canada, Mexico, China and those produced domestically.
It released a paper on July 17 covering data through July 15.
(…) Our data span from October 1, 2024 to July 15, 2025. (…)
The 2025 tariffs on Chinese goods first became binding on February 4, at a rate of 10%, but had little immediate effect on these retail prices. The situation changed on March 4—marked by a dashed vertical line in the figure—when the U.S. imposed 25% tariffs on imports from Canada and Mexico, along with an additional 10% tariff on Chinese goods. Immediately afterward, the prices of imported goods increased by approximately 1.2 percentage points, while domestic goods prices rose by roughly half as much.
After Liberation Day on April 2, the rate of price growth for imported goods quickly accelerated, coinciding with the announcement of a baseline 10% tariff on goods from all countries.
For Chinese goods, the tariff was raised to 125% on April 10 as trade tensions between the two countries escalated. Domestic goods prices also increased during this period, but at a significantly slower pace.Prices responded again after May 12, when the US temporarily reduced additional tariffs on Chinese goods to 10% for a 90-day period. Following the announcement, there was a modest and short-lived decline in prices across all goods. However, by early June, both imported and domestic goods appeared to resume their prior trends.
While these results show relatively quick price responses to tariff announcements, the overall magnitude of these changes remains modest. Across the entire sample, the cumulative increase in imported goods prices since early March is approximately 3 percent. This increase is still small relative to the size of some of the announced tariff rates, particularly for Chinese goods.
These findings are consistent with patterns observed during the first round of U.S. trade tensions in 2018–2019.
(…) the price increases observed for domestic goods suggest that tariffs have broader effects beyond directly targeted imports. (…)
Many U.S.-made products rely on imported inputs—such as components, packaging, or raw materials—from tariffed countries. Even when final assembly occurs domestically, firms may raise prices to reflect rising input costs. In addition, as tariffs make imported goods more expensive, firms may anticipate a shift in demand toward domestic substitutes. Expecting this substitution, they may increase prices on U.S.-made goods, especially in categories where domestic and foreign products are close substitutes. (…)
After the ”Liberation Day” announcements on April 2, price trends between these countries began to diverge. Chinese prices continued to rise steadily in the weeks that followed, as the trade tensions escalated, with the US imposing tarrifs rates up to 125% on Chinese imports. Canadian prices increased in late April but soon declined again. Mexican goods saw a more distinct divergence, with prices dropping after April 2.
This divergence likely reflects a higher number of exemptions for Mexico and Canada—particularly for goods compliant with USMCA—and growing expectations of an imminent trade agreement with these countries. (…)
The [next] figure shows that in early March, prices of domestically produced goods in affected categories rose in parallel with those of imported goods. However, starting in April, the two trends began to diverge: import prices continued to increase—driven by tariff pass-through and ongoing supply-chain frictions—while domestic prices in the same affected categories grew at a lower pace. Following the announcement of the tariff pause with China on May 12, domestic prices in these categories fell temporarily.
By contrast, domestic goods in unaffected categories experienced a more gradual and steady price increase. This pattern may reflect uncertainty regarding which sectors or inputs might eventually be subject to tariffs. Firms in these categories may have responded more slowly, incrementally adjusting prices in anticipation of future tariffs or disruptions.
Alternatively, retailers might have raised prices more broadly to protect margins amid growing uncertainty or to preserve relative pricing structures across different product categories. (…)
Our analysis reveals that the announcement of U.S. tariffs prompted rapid but still relatively modest price adjustments, with the extent of these changes varying by product origin and category.
The most pronounced price increases occurred among imported goods, which have risen approximately 3 percent since early March. However, domestic products also saw some gains, likely driven by expectations of rising input costs and shifts in consumer demand.
Notably, we observe differences across countries: price increases for Chinese goods were both larger and more persistent than those for products from Canada and Mexico, where retailers may have viewed the tariffs as more temporary or less likely to be sustained. Importantly, price pressures extended beyond directly affected categories, with even unaffected sectors showing gradual increases—suggesting broader strategic pricing and supply chain spillovers.
These findings underscore the wide-ranging impact of trade policy, which can influence retail prices far beyond the specific goods targeted by tariffs.
(…) Net cash flow at its automotive division is now seen at between €1 billion and €3 billion from €2 billion to €5 billion previously (…). Volkswagen said the lower end of the forecast ranges assume the current U.S. import tariffs of 27.5% will continue to apply in the second half of 2025. The upper end assumes these tariffs will be reduced to 10%. (…)
“What really matters is cash in the bank,” Volkswagen Chief Financial Officer Arno Antlitz said in a statement. (…)
Tariffs are outgoing cash.
- Puma Plunges as New CEO Cuts Outlook on Weak Demand, Tariffs The company anticipates US tariffs to hurt gross profits this year by about €80 million.
Year-to-date, 28% fewer Canadian residents have crossed the U.S. border by car than by this point in 2024.
Data: Statistics Canada. Chart: Axios Visuals
SENTIMENT WATCH
Independents Drive Trump’s Approval to 37% Second-Term Low
Six months into his second term, President Donald Trump’s job approval rating has dipped to 37%, the lowest of this term and just slightly higher than his all-time worst rating of 34% at the end of his first term. Trump’s rating has fallen 10 percentage points among U.S. adults since he began his second term in January, including a 17-point decline among independents, to 29%, matching his lowest rating with that group in either of his terms.
For their part, Republicans’ ratings have remained generally steady near 90% and Democrats have been consistently in the low single digits.
These latest findings are from a July 7-21, 2025, Gallup poll, which began days after Trump signed into law the One Big Beautiful Bill Act on July 4. The law addresses many of Trump’s second-term priorities, including tax cuts for individuals and corporations and increased spending for border security, defense and energy production. It also cuts funding for healthcare and nutrition programs such as Medicaid and the Supplemental Nutrition Assistance Program to offset some of the costs of the tax cuts and spending increases.
Trump closes out the second quarter of his second term in office having accomplished much of what he said he would do if elected. Yet, outside of his Republican base, relatively few Americans are pleased with his performance. His rating has fallen to the lowest point of his second term, essentially matching where he was at the same time in his first term, which is not much higher than his all-time worst rating. He also gets generally poor marks for handling key issues, including immigration and the economy, which were major focuses of his campaign.
“No more than 36% of independents approve of the president’s job performance” on any of the eight issues Gallup polled: (Axios)
- The situation with Iran (36%).
- Foreign affairs (33%).
- Immigration (30%).
- The economy (29%).
- Foreign trade (27%).
- Israel (27%).
- The situation in Ukraine (24%).
- The federal budget (19%).
Data: Gallup. Chart: Axios Visuals
Five-Cent Meme Stock Makes Up 15% of Trading on US Exchanges
Shares of tiny Healthcare Triangle Inc. stood out as the most actively-traded name on US exchanges on Thursday, another example of how investor exuberance is fueling wild gyrations throughout the equity market.
The little-known healthcare information technology company saw its stock price more than double to just above five cents, with over 3 billion shares changing hands. That was equivalent to about 15% of the total shares traded on US exchanges for the day, data compiled by Bloomberg show.
After surging 138% at the open, Healthcare Triangle’s shares closed up 115%, with no apparent news to spark the eye-popping move.
The total value of shares traded for the day stood at approximately $150 million, nearly seven times the company’s market capitalization.
The surge was among the latest manifestations of the meme stock mania that has sparked rallies in speculative names, with Kohl’s Corp., GoProInc. and Krispy Kreme Inc. among the list of companies whose shares have seen big moves. Shares of Opendoor Technologies, which shot higher on Monday, were also notable for massive trading volumes.
China’s Unitree Offers a Humanoid Robot for Under $6,000
Unitree Robotics is marketing one of the world’s first humanoid robots for under $6,000, drastically reducing the entry price for what’s expected to grow into a whole wave of versatile AI machines for the workplace and home.
The startup, among the frontrunners in Chinese robotics, on Friday announced its R1 bot with a starting price of 39,900 yuan (or $5,900). The machine weighs just 25kg and has 26 joints, the company said in a video posted to WeChat. It’s equipped with multimodal artificial intelligence that includes voice and image recognition.
The four-figure price tag highlights the ambitions of a new generation of startups trying to leapfrog the US in a groundbreaking technology. Unitree rose to prominence in February after CEO Wang Xingxing joined big names like Alibaba Group Holding Ltd.’s Jack Ma and Tencent Holdings Ltd.’s Pony Ma at a widely publicized summit with Chinese President Xi Jinping.
The new robot’s launch coincides with China’s biggest AI forum, set to kick off this weekend with star founders, Beijing officials and AI-hungry venture investors converging in Shanghai. The World Artificial Intelligence Conference will bring together many of the key figures expected to drive China’s efforts around AI, which is finding a physical expression in the rapid development of more humanoid robots.
After decades of dominance by American companies like Boston Dynamics, Chinese companies are pushing ahead with humanoids for factories, households and even military use. Pricing is crucial to their proliferation. (…)
Rival UBTech Robotics Corp. said recently that it planned a $20,000 humanoid robot that can serve as a household companion this year, seeking to expand beyond factories.
If it works as advertised, Unitree’s new robot would mark a milestone for the robotics industry, particularly when it comes to complex humanoids. Morgan Stanley Research estimates that the cost of the most-sophisticated humanoid in 2024 was around $200,000.
