Morgan Stanley lifts July ISM Manufacturing PMI forecast to 53.8

NEW YORK, July 27. Morgan Stanley has raised its July ISM Manufacturing PMI forecast to 53.8 from 53.3, pointing to stronger factory activity in Texas, increased production, and solid new orders as the basis for the revision. The upgrade signals that U.S. manufacturing is tracking ahead of the bank's prior expectations for July.

Demand signals behind the revision

Morgan Stanley (MS) said longer delivery times and higher inventory levels reflect stronger demand, and it drew an explicit line between that reading and what supply chain disruption would produce. The clarification carries weight. Delivery lags and inventory builds can read as either a demand surge or a logistics bottleneck, and the interpretation shapes how markets and policymakers respond to the incoming data.

Texas factory activity was specifically cited by the bank as a driver of the forecast change. Increased production and solid new orders rounded out the indicators the bank said supported the revision.

The ISM Manufacturing PMI measures business conditions across U.S. factories. A reading above 50 marks expansion; the bank's revised forecast of 53.8 places the sector well inside that range.

Easing prices against rising energy costs

Price pressures have eased, the bank said, even as energy costs have moved higher. That combination is notable. Manufacturing is one of the more energy-intensive parts of the economy, so costs easing in the sector despite an energy headwind suggests the broader price picture in goods is not deteriorating.

For Federal Reserve watchers, a manufacturing sector expanding above 53 without corresponding price acceleration is a cleaner signal. It reduces the risk that a strong PMI print forces a hawkish re-read of the rate path.

Morgan Stanley's revised forecast of 53.8 reflects a sector where demand is strengthening and costs are contained, with regional data from Texas running ahead of where the bank had placed July activity.