Manufacturing Sector Unchanged In July Says ISM

Reasonable level of activity says Institute for Supply Management

Economic activity in the manufacturing sector was unchanged in July, while the overall economy grew for the 81st consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

"In this month's report, manufacturers indicate no change in overall business activity when comparing July to June. This continues a trend biased toward relatively minor contraction established more than 12 months ago. Manufacturing has maintained a reasonable level of activity during a period in which other sectors of the economy have been in recession. While the PMI indicates little to no change has occurred during this period, it would be hard to convince manufacturers who are faced with higher costs and uncertain demand that there is little change taking place," said Norbert J. Ore, C.P.M., chair of the Institute for Supply Management Manufacturing Business Survey Committee.

The PMI registered 50%, 0.2 percentage point lower than the 50.2% reported in June. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting. A reading of 50% indicates no change from the previous month.

"The sector is seeing major reductions in motor vehicles and housing-related production and many industries show little, if any, growth. Fortunately, those industries that export a large portion of their production have benefited from the falling dollar.

"Also, as the report indicates, imports are declining and this should help offset the domestic recessionary forces," he added. "Overall though, manufacturing seems to be in a mild downward drift as it battles high commodity cost pressures and domestic malaise," said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI.

The six industries reporting growth in July -- listed in order --are: Computer & Electronic Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Primary Metals; Paper Products; and Chemical Products. The industries reporting contraction in July are: Plastics & Rubber Products; Wood Products; Transportation Equipment; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Machinery; Miscellaneous Manufacturing; and Fabricated Metal Products.

The New Orders Index registered 45% in July, 4.6 percentage points lower than the 49.6% registered in June.

The Production Index increased to 52.9% in July, an increase of 1.4 percentage points from the 51.5% reported in June.

The Employment Index registered 51.9% in July, which is an increase of 8.2 percentage points when compared to the 43.7% reported in June.

Manufacturers' inventories decreased in July as the Inventories Index registered 45%, which is 6.2 percentage points lower than the 51.2% reported in June. This reverses the one-month occurrence of inventory growth reported in June.

The Prices Index registered 88.5% in July, indicating manufacturers are paying higher prices on average when compared to June. While 80% of respondents reported paying higher prices and 3% reported paying lower prices, 17% of supply executives reported paying the same prices as the preceding month.

New Export Orders Index registered 54% in July, a decrease of 4.5 percentage points when compared to June's index of 58.5%. This is the 68th consecutive month of growth in the New Export Orders Index.

Imports of materials by manufacturers contracted during July as the Imports Index registered 46.5%, 0.5 percentage point higher than the 46% reported in June. This is the sixth consecutive month of contraction in imports.

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