Manufacturing Expands In July

Overcomes housing bust and financial jitters

Economic activity in the manufacturing sector expanded in July for the sixth consecutive month, while the overall economy grew for the 69th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

"The July ISM report indicates that the U.S. manufacturing sector should continue to grow in spite of the housing bust and jittery financial markets," said Cliff Waldman, economist for the Manufacturers Alliance/MAPI. "New orders and production activity, while slower in July than June, indicate that moderately strong export demand is compensating for weak business investment and uncertain consumer spending to allow enough of an orders backlog for U.S. factory growth to continue at a moderate pace for the balance of the year.

"Risks to the factory sector do remain, however," he added. "The economic and financial impacts of the housing bust could negatively impact already weak business equipment demand. And while strong global growth and a weakening dollar will allow export demand to act as a continual stabilizer, weak activity in Canadian and Mexican manufacturing could be troublesome for U.S. capital goods exporters in those key markets."

The Employment Index fell slightly from 51.1% in June to 50.2% July.

Manufacturers' inventories registered 48.5% in July, which is 3.2 percentage points higher than June's reading of 45.3%. This is the 12th consecutive month of inventory liquidation.

The Index registered 65%, indicating manufacturers are paying higher prices on average when compared to June. While 38% of respondents reported paying higher prices and 8% reported paying lower prices, 54% of supply executives reported paying the same prices as the preceding month.

The 10 industries reporting growth in July -- listed in order -- are: Wood Products; Furniture & Related Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Paper Products; Textile Mills; Chemical Products; Computer & Electronic Products; Nonmetallic Mineral Products; and Primary Metals.

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