Manufacturing boomed in July. Thank all that AI money
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What is the main topic discussed in this episode?
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 Kyle Risdell. It is Tuesday today for August. Good as always to have 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. 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.
Whether it's property plant equipment, whether it's investing in a new segment of the business.
Miskin says the manufacturing sector is also seeing plenty of demand, especially from other businesses.
And what is the big business expense of 2026?
It's this little herd of thing called AI. Miskin says data center development is creating demand for computers and other electronics. It's also creating demand for industrial equipment, says Bernard Yarros, lead U.S. economist with Oxford Economics.
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.
But Yarrow 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. Yarrow says that means all kinds of businesses are going to have to restock.
That's also going to be a broad tailwind to manufacturing as businesses need to replenish their inventories of goods.
Why did U.S. manufacturing grow at the fastest monthly rate in four years in July?
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.
Instead of either delaying some of these capital expenses or purchases or hoping that there'd be a different outcome, there's this realization that this is the new normal, but we can operate successfully in this.
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 for Marketplace. 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 talked 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 U.S. companies, but not always in the most transparent way, which leads me... to the U.S. 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 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?
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Chapters
6 chapters
1
What is the main topic discussed in this episode?
0:02–2:28
2
Why did U.S. manufacturing grow at the fastest monthly rate in four years in July?
2:28–8:42
3
How is AI investment driving demand for manufacturing and data center equipment?
8:42–11:21
4
What inventory shortages are prompting businesses to restock and boost factory activity?
11:21–18:46
5
How much has the U.S. government invested in private companies and why does it matter?
18:46–21:25
6
What does the CFR deal tracker reveal about the Trump administration’s equity investments?
21:25–26:51