Economic Activity in Manufacturing Slows in July

Economic activity in the manufacturing sector slipped in July, according to the latest Manufacturing ISM® Report On Business®.

“The July PMI® registered 58.1 percent, a decrease of 2.1 percentage points from the June reading of 60.2 percent. The New Orders Index registered 60.2 percent, a decrease of 3.3 percentage points from the June reading of 63.5 percent,” said Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. “The Production Index registered 58.5 percent, a 3.8 percentage point decrease compared to the June reading of 62.3 percent. The Employment Index registered 56.5 percent, an increase of 0.5 percentage point from the June reading of 56 percent.”

Import tariffs started to put pressure on the manufacturing supply chain. While manufacturing activity was positive, the ISM index was down from the previous year. The ISM said its index of national factory activity fell to a reading of 58.1 last month from 60.2 in June. A reading above 50 in the ISM index indicates an expansion in manufacturing, which accounts for about 12 percent of the U.S. economy.

“Comments from the panel reflect continued expanding business strength. Demand remains strong, with the New Orders Index at 60 percent or above for the 15th straight month, and the Customers’ Inventories Index remaining low, said Fiore.  “The Backlog of Orders Index continued to expand, but at lower levels. Production and employment continues to expand in spite of labor and material shortages. Inputs — expressed as supplier deliveries, inventories and imports — had expansion increases, due primarily to negative supply chain issues, but at easing levels compared to the prior month. Lead-time extensions, steel and aluminum disruptions, supplier labor issues, and transportation difficulties continue. Export orders expanded, but at lower levels. Price pressure remains strong, but the index softened for the second straight month. Demand remains robust, but the nation’s employment resources and supply chains continue to struggle. Respondents are again overwhelmingly concerned about how tariff-related activity, including reciprocal tariffs, will continue to affect their business,” he said.

Of the 18 manufacturing industries, 17 reported growth in July, in the following order: Textile Mills; Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Computer & Electronic Products; Petroleum & Coal Products; Paper Products; Printing & Related Support Activities; Nonmetallic Mineral Products; Machinery; Plastics & Rubber Products; Miscellaneous Manufacturing; Fabricated Metal Products; Food, Beverage & Tobacco Products; Furniture & Related Products; Chemical Products; Wood Products; and Transportation Equipment. The only industry reporting a decrease in July is Primary Metals.

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