Factory output climbs for the first time since February as firms boost hiring, but inflation pressures intensify as businesses stockpile ahead of tariffs.
U.S. manufacturing activity climbed in June, fueled by strong domestic demand and tariff-driven stockpiling, according to a new report from S&P Global, which showed an acceleration in both factory output and employment—alongside a renewed surge in inflationary pressures.
Released on June 23, the report revealed that the manufacturing output index rose to 51.5 in June, up from 49.4 in May. That marks the first reading above the neutral 50 threshold—which separates expansion from contraction—since February, signaling a return to growth in the factory sector as firms ramped up production and hiring to meet stronger demand.
Hiring accelerated broadly in June, with manufacturing job creation reaching a 12-month high and service-sector hiring hitting its fastest pace in five months as businesses responded to mounting workloads.
Chris Williamson, chief business economist at S&P Global Market Intelligence, attributed some of the demand strength to temporary factors, noting that businesses have been building inventories in anticipation of further price hikes and supply disruptions tied to tariffs.
“While domestic demand has strengthened, notably in manufacturing, to encourage higher employment, this in part reflects a boost from stock building, in turn often linked to concerns over higher prices and supply issues resulting from tariffs,” Williamson said in a statement, adding that he expects this boost to fade in the coming months.
At the same time, cost pressures intensified. Measures of prices paid by factories for inputs—and charged for finished goods—jumped to levels last seen in 2022. Nearly two-thirds of manufacturers attributing higher input costs cited tariffs, while just more than half linked higher selling prices to the same cause.
“Prices for goods have meanwhile jumped sharply again, the rate of increase accelerating to a three-year high as firms pass higher tariff-related costs on to customers,” Williamson said. “The data therefore corroborate speculation that the Fed will remain on hold for some time to both gauge the economy’s resilience and how long this current bout of inflation lasts for.”
By Tom Ozimek
