REAL-TIME GLOBAL RESEARCH
US Focus: What’s up with manufacturing ISM
Research evidence excerpt
Michael S Hanson (1-212) 622-8603
JPMorgan Chase Bank NA
North America Economic Research
07 August 2026
US Focus: What’s up with
manufacturing ISM
The ISM manufacturing index has surged this year, from a
depressed 47.9 reading in December to a robust 55.6 for July
(Figure 1). This rise followed surprisingly prolonged weakness: the index averaged just 48.0 for 2022 through 2025
despite GDP averaging a well-above-trend 2.6% annualized
growth. This rebound is unlikely to owe to a sudden improvement in the tariff outlook given recent actions. Moreover,
while the tech sector (as well as aerospace) has contributed
significantly to industrial output, this story hasn’t arisen in the
past six months. Rather, we view the puzzling combination of
a sustained slowdown and then a sudden rebound in the manufacturing ISM as mostly catching up to other indicators.
60
Services
56
Manufacturing
48
2Q07
4Q19
0.13
0.016
2Q07
4Q19
0.08
0.159
64
ISM services
production
0.32
0.000
0.25
0.000
0.33
0.000
0.20
0.007
60
PMI manuf
production
0.34
0.000
0.27
0.000
56
Adjusted R 2
0.27
0.37
0.38
0.41
0.42
0.53
0.48
0.54
48
19
20
Source: ISM, J.P. Morgan
21
22
23
24
25
26
27
This jump was broad-based across the components that comprise the index, with production up 7.8 points and new orders
up 9.3 points. While all components have risen year-to-date,
not all contribute to the ISM’s (limited) forecasting power for
growth. Rather, in addition to the headline, the production and
new orders series have some predictive power for the current
quarter of real GDP growth (% change, q/q saar).
Table 1: GDP growth regressions
Dependent variable: %q/q saar change in real GDP
1Q48 1Q48 1Q48 1Q48 3Q85 3Q85 3Q85 3Q85
Regressor(s)
2Q85 2Q85 2Q85 2Q85 4Q19 4Q19 4Q19 4Q19
ISM manuf
0.36
---0.25
---0.000
0.000
ISM Manuf
production
0.37
0.000
ISM Manuf
new orders
Adjusted R 2
0.43
0.48
-0.07
0.463
0.20
0.000
0.42 0.49
0.000 0.000
0.54
0.24
0.54
0.28
0.15
0.187
0.29 0.06
0.000 0.636
0.27
Table 2: GDP growth regressions (cont'd)
2Q07
4Q19
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Building on this finding, we next compare the fit of the production indexes across ISM manufacturing, ISM services, and
PMI manufacturing.…
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