Manufacturing growth slowed in July

by Talk Business & Politics staff (staff2@talkbusiness.net) 58 views 

The Purchasing Managers’ Index (PMI) fell 0.5 percentage points to 51.2% in July, and the overall economy expanded for the 123rd consecutive month, according to the Institute for Supply Management (ISM). A reading above 50% indicates the manufacturing economy is expanding, and below 50% indicates it’s contracting.

The new orders index rose 0.8 percentage points to 50.8% in July, from June. The production index fell 3.3 percentage points to 50.8%. The employment index declined 2.8 percentage points to 51.7%. The suppliers deliveries index rose 2.6 percentage points to 50.7%. The inventories index increased by 0.4 percentage points to 49.5%. The prices index declined 2.8 percentage points to 45.1%.

Business continued to expand but at soft levels, and July was the fourth consecutive month for slowing PMI growth. Demand expansion resumed as the new orders index grew slightly, the customers’ inventories index was “about right,” and the backlog of orders index fell for the third consecutive month but at stronger levels than previous months, according to ISM. New exports orders declined. Consumption, which is comprised of the production and employment indexes, expanded but at lower levels. This led to a combined decrease of 6.1 percentage points to the PMI calculation because of minimal new-order growth, backlog contraction and customer-inventory gains. Inputs, which include supplier delivers, inventories and imports, fell as a result of inventory tightening for the second consecutive month and continued slower supplier deliveries, which led to a combined 3 percentage point increase in the supplier deliveries and inventories indexes. Imports and new exports orders fell.

Overall, inputs show supply chains are responding slower, and supply managers are matching inventories to new orders. Prices fell for the second consecutive month, and this indicates lower overall demand.

Concerns declined related to the U.S.-China trade dispute, but trade remains an issue. Supply chains have made adjustments as a result of moving manufacturing from China. Overall, sentiment was mixed in July.

The following nine manufacturing industries reported growth in July: wood products; printing and related support activities; furniture and related products; food, beverage and tobacco products; plastics and rubber products; computer and electronic products; textile mills; petroleum and coal products; and chemical products. The following nine industries reported contraction in July: apparel, leather and allied products; fabricated metal products; primary metals; nonmetallic mineral products; transportation equipment; paper products; miscellaneous manufacturing; electrical equipment, appliances and components; and machinery.

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