Broad-based contraction across sectors in July; all sub-indices were lower than in June. Sharp decline in the US dragged down the aggregate amid reduced tariff-related inventory building. Commodity price and supply pressures linked to US trade policy uncertainty, Standard Chartered's Research Analyst Ethan Lester reports.

Inventories shift

"The global aggregate PMI for July shows a m/m deterioration in manufacturing activity across consumer, intermediate and investment goods, following the improvement in June. The 1.6-point fall in the index was led by the US, which saw the steepest monthly decline since June 2022. US PMIs contracted for the first time in 2025, reflecting reduced input buying and weakened demand for raw materials. The switch away from inventory building helped to reduce the rate of US factory gate inflation, which has seen the broadest and most sustained rise YTD since the pandemic."

"Asia excluding China and Japan was a bright spot, and India remained the best performer globally. Production volumes fell back into decline in China and Japan after short-lived June gains. The euro area saw the fifth consecutive month of growth, with ongoing divergence as Germany recorded its deepest contraction since December. Emerging Europe underperformed the euro area, with Polish exports declining at the sharpest rate in nearly two years."

"Commodity price and supply pressures remained broadly subdued in July amid continued deflation in China. However, there were reports of higher prices of electrical items and semiconductors relative to their long-term averages amid continued uncertainty over Section 232 and Section 301 tariffs. Shortages of stainless steel and aluminium were also above their long-run averages, following the doubling of US tariff rate levels in June. Reported freight capacity shortages were the highest since April 2023, and seven times above the long-run average."