July's Purchasing Managers' Index (PMI) and Institute for Supply Management (ISM) reports reveal significant strength across the U.S. manufacturing sector, with new orders climbing and customer inventories running low — dynamics that historically translate into increased freight demand and a stronger peak shipping season.

According to a FreightWaves SONAR update released Tuesday, August 4, July's PMI rose to 55.6, up 2.3% from June and marking the highest reading since May 2022. The ISM manufacturing index came in at 58.9, reinforcing indications of broad-based industrial expansion that could support stronger freight volumes through the remainder of the year. Both figures sit well above the 50 threshold that separates expansion from contraction in these surveys, meaning a clear majority of surveyed firms reported growth.

These figures are significant for carriers, brokers, and shippers because they signal that manufacturers are operating with lean inventories and will likely need to restock — a pattern that has traditionally driven truckload and intermodal demand. For context, manufacturing activity and freight volumes are closely correlated: when factories ramp up production and purchasing, they generate shipments of raw materials inbound and finished goods outbound, creating layered freight flows across trucking, rail, and intermodal networks.

ISM customer inventories registered 40.7 in July, down 1.6% from the prior period, a level that survey respondents characterized as too low. This suggests a replenishment cycle could be underway, which would further support freight movement in the coming months.

Additional ISM sub-indices reinforced the overall strength of the report. Production climbed to 58.5, a 6.3% month-over-month increase. Backlogs rose 4.5%, and manufacturing employment gained 3.1%. The PMI report similarly showed new orders increasing and manufacturing employment turning positive, all set against a broader U.S. GDP growth backdrop of 2.8%.

A SONAR analyst summarized the findings: "Orders are up. There is a need for replenishment in inventories. Backlogs are up. Everything is pointing to strength in these numbers and continued expansion in July, showing that we should be seeing some increased demand."

On the labor front, 60% of ISM survey respondents reported that their companies are actively hiring, while the remainder indicated they are managing existing headcounts. That split suggests manufacturers are cautiously optimistic rather than pulling back on workforce expansion.

The analyst also noted that trucking capacity has not meaningfully re-entered the market, with tight supply stemming largely from regulatory pressure rather than demand softness. This dynamic matters because the freight market has been navigating a prolonged period of excess capacity and soft rates following the pandemic-era boom and subsequent correction; a demand recovery meeting constrained supply is the combination that has historically shifted pricing leverage back toward carriers. The combination of rising demand signals and constrained available capacity could accelerate rate movement if freight volumes track manufacturing trends into the traditional fall peak season, when retailers and manufacturers typically ramp up shipping ahead of the holiday consumer buying period. The analyst specifically flagged the end of August as a potential inflection point to monitor.

The manufacturing sector's continued strength has implications across the supply chain. Raw materials and commodities flowing into factories, finished goods moving out to distribution centers, and products ultimately reaching retailers and end consumers all contribute to freight generation. With PMI and ISM indicators pointing to sustained expansion, those freight flows are expected to remain robust.

Separately, FreightWaves SONAR announced a new data partnership with Retlia to launch rtleg.usa, dubbed "the Register." The index is designed to provide users with a macroeconomic view of U.S. retail conditions and is now available within the SONAR platform.

Key July Data Points:

• PMI: 55.6, up 2.3% from June — the strongest reading since May 2022.
• ISM Manufacturing Index: 58.9.
• ISM Customer Inventories: 40.7, down 1.6%, indicating a likely restocking cycle.
• ISM Production: 58.5, up 6.3% month-over-month.
• ISM Backlogs: Up 4.5%.
• Manufacturing Employment: Up 3.1%, with 60% of surveyed companies actively hiring.
• U.S. GDP Growth: 2.8%.

Source: FreightWaves