Manufacturing economic activity continued to contract as the Purchasing Manager’s Index registered 46.4%, according to the Institute for Supply Management’s July 2023 manufacturing sector report. The July PMI came in 0.4 percentage points higher than the previous month.
“The July composite index reading reflects companies continuing to manage outputs down as order softness continues,” notes Timothy Fiore, chair of the ISM’s manufacturing business survey committee. “For a second straight month, none of the 10 subindexes were above 50%.” Anything lower than 50% represents contraction.
Although they remain in contraction territory, the new orders index and production index recorded increases of 1.7 and 1.6 points, respectively. On the other hand, the employment index dropped 3.7 points to 44.4%.
Of 18 manufacturing industries, only two reported growth in July: petroleum & coal products and furniture & related products.
Demand continues to ease, with the Fiore citing “(1) New Orders Index contracting, though at a slower rate, (2) New Export Orders Index moving deeper into contraction and (3) Backlog of Orders Index improving compared to June but remaining at a low level.”
In the comments of the survey, several respondents note the continued need to adapt to market conditions. One executive in the food, beverage & tobacco products industry says, “The reports on cooling inflation and consumer confidence are driving expectations of a very strong back half (of the year).”
Although, this doesn’t mean all manufacturers are expecting to thrive. One respondent from the primary metals industry reflects on an enduring struggle to find reliable and qualified talent, saying, “Labor availability is still the number one constraint impacting production. Cannot find qualified salaried or skilled trades people to hire. Hourly temporary employees are of poor quality and walk off after taking the job.”
