Manufacturing boomed in July. Thank all that AI money

**Kai Rizdal** (0:02)
On the program today, we are going to do this economy big picture, and we are going to do it small. From American Public Media, this is Marketplace.
In Los Angeles, I'm Kai Rizdal. It is Tuesday, today, 4 August. Good as always. Stab you along, everybody. We turn today for our understanding of the current state of this economy to American Industry. The Institute for Supply Management tells us that last month, the entire manufacturing slice of this economy grew at its fastest rate in four years. There's higher demand, there are growing backlogs, there's more production on factory floors and more manufacturing employment as well.
That is noteworthy in and of itself. All the more so though, because manufacturers still have a whole lot of challenges. Higher energy costs, higher interest rates, tariffs, and both business and consumer uncertainty staring them in the face. So Marketplace's Justin Ho gets us going with why American factories are so busy right now.

**Justin Ho** (1:11)
The manufacturing sector has been picking up, in part because manufacturers are building out their capacity. Matthew Miskin with Manulife John Hancock Investments says last year's tax law helped many businesses upgrade.

**Matthew Miskin** (1:23)
Whether it's property plant equipment, whether it's investing in a new segment of the business.

**Justin Ho** (1:29)
Miskin says the manufacturing sector is also seeing plenty of demand, especially from other businesses.

**Matthew Miskin** (1:34)
And what is the big business expense of 2026? It's this little herd of thing called AI.

**Justin Ho** (1:41)
Miskin says data center development is creating demand for computers and other electronics. It's also creating demand for industrial equipment, says Bernard Yaros, lead US economist with Oxford Economics.

**Bernard Yaros** (1:52)
You're seeing a lot of demand for engines, turbines, and power transmission equipment. Because the AI build out a key component of that is ultimately the necessary upgrades to the power grid.

**Justin Ho** (2:05)
But Yaros says it's not just AI.
The Institute for Supply Management found that inventory levels right now are low for transportation equipment, food and beverages, plastic and rubber products, chemicals. Yaros says that means all kinds of businesses are going to have to restock.

**Bernard Yaros** (2:20)
That's also going to be a broad tailwind to manufacturing as businesses need to replenish their inventories of goods.

**Justin Ho** (2:28)
Businesses also might want to restock because they're worried about the president's new round of import taxes. But Scott Paul, with the Alliance for American Manufacturing, says many manufacturers have gotten used to tariffs by now.

**Scott Paul** (2:39)
Instead of either delaying some of these capital expenses or purchases or hoping that there would be a different outcome, there's this realization that this is the new normal, but we can operate successfully in this.

**Justin Ho** (2:54)
Paul says higher tariffs could cause the manufacturing sector to slow down. Same with an escalation in the Middle East or higher interest rates. But for now, he says, the sector is proving to be resilient. I'm Justin Ho from Marketplace.

**Kai Rizdal** (3:07)
On Wall Street today, well, I mean, clearly, artificial intelligence really is the greatest thing since sliced bread, and the Strait of Hormuz is going to open any day now.
We'll have the details when we do the numbers.
We'll talk a little bit on this program about how the Trump White House is inserting itself into private enterprise. Industrial policy is one way to put it. State capitalism is another. Probably the best known example is the government's 10% equity stake in Intel. Since January of 2025, the government has invested more than $27 billion in US companies, but not always in the most transparent way, which leads me to the US government deal tracker that's being kept by the Council on Foreign Relations. It's being kept under the watchful eye of senior fellow Jonathan Hillman. John, welcome to the program. Good to have you on. Thanks for having me. A lot of people probably have heard about the government's stake in Intel, maybe one or two others. I need you, though, to sort of zoom out for me and give me the big picture. Where are we with government investment in these companies?

**Jonathan Hillman** (4:34)
Yeah, so I think it's important to recognize the government taking equity stakes is not a new thing. The government did a round of this during World War II. We did it in the 80s with Chrysler. We did it in the aftermath of the financial crisis.
But what we're seeing right now is, I think, notable in terms of the number of deals. We're tracking 37 deals since January 2025 involving equity or quasi-equity stakes. And the vast majority of them seem to be focused on strengthening supply chains, so areas like semiconductors, critical minerals, or helping the US compete in emerging technologies like quantum computing.