AI Summary
5 min readU.S. manufacturing grew in July at its fastest pace in four years, driven largely by business spending on artificial intelligence infrastructure and a broad restocking cycle. Meanwhile, the government has taken equity stakes in 37 companies since January 2025, deploying $27 billion in a modern industrial policy push that operates in a legal gray area. The labor market remains stuck in a pattern of low hiring and low firing, with long-term unemployment quietly rising. And in a development that has baffled energy analysts, China slashed its oil imports by nearly half after the Strait of Hormuz closure without any visible reduction in economic activity, likely tapping secret underground reserves to keep global oil prices from spiking.
Manufacturing’s AI-Fueled Boom
The Institute for Supply Management reported that the manufacturing sector expanded in July at its strongest rate in four years. Factory output, backlogs, and employment all rose. This is happening despite persistent headwinds: higher energy costs, elevated interest rates, tariffs, and uncertainty from both businesses and consumers.
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What you'll learn
- 1 (00:56) **Manufacturing Boom in July** - The Institute for Supply Management reports the manufacturing sector grew at its fastest rate in four years, with higher demand, growing backlogs, more production, and more employment.
- 2 (02:04) **AI Spending Drives Factory Demand** - The big business expense of 2026—AI—is fueling demand for computers, electronics, and industrial equipment.
- 3 (02:37) **Inventory Replenishment Adds to Manufacturing Tailwind** - Low inventory levels across various sectors are prompting businesses to restock.
- 4 (03:03) **Manufacturers Adapt to Tariffs and Headwinds** - Many manufacturers have gotten used to tariffs, but other factors could still slow the sector.
- 5 (04:17) **Government's Growing Equity Stakes in Private Enterprise** - The Trump White House is inserting itself into private enterprise through industrial policy and state capitalism, notably with a 10% equity stake in Intel.
- 6 (05:56) **Historical Context and Gray Areas in Government Investments** - Unlike past government investments directed by Congress, the current executive branch actions are operating in a legal gray area.
- 7 (07:55) **$27 Billion is a Drop in the Bucket** - Compared to the $700 billion TARP program, the current investments are small but aimed at catalyzing larger private investment.
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Show Notes
In July, the manufacturing sector grew at its fastest month-to-month rate in four years. A new tax law likely boosted company spending to some degree, but AI investment packed the biggest punch — demand is strong and the money is flowing. Also in this episode: McDonald’s suffers a sales slump, the latest JOLTS data points to a steadily improving labor market, and Kai talks to one economist behind a Trump administration investment tracker.
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