The ISM (Institute for Supply Management) Manufacturing PMI registered 48% in July. This decrease of one percentage point from June’s figure of 49% indicates that manufacturing economic activity contracted at a faster rate last month. July marks the fifth consecutive month of contraction.
“Of the five subindexes that directly factor into the Manufacturing PMI, only one (production) is in expansion territory, down from two in June,” says Susan Spence, chair of the ISM’s manufacturing business survey committee. Anything lower than 50% represents contraction.
The production index remained in expansion territory, gaining 1.1 points for a July reading of 51.4%. The new orders index continued contraction but at a slower rate after recording a 0.7-point increase to 47.1% last month.
The employment index dropped 1.6 points to 43.4% in July. “For every comment on hiring, there were two on reducing head counts — a fairly wide ratio, historically speaking — reflecting companies’ continuing focus on accelerating staff reductions due to uncertain near- to mid-term demand. Layoffs were the primary measure, an indication that staff shrinking continues to be urgent,” says Spence.
Seven manufacturing industries reported growth in July:
- Apparel, leather & allied products
- Plastics & rubber products
- Nonmetallic mineral products
- Textile mills
- Miscellaneous manufacturing
- Furniture & related products
- Primary metals
“Of the six largest manufacturing industries, none expanded in July, compared to four in June,” Spence says.
In the comments of the survey, respondents report a mixed bag of business conditions depending on industry, but concerns around tariffs and uncertainty still dominate the conversation.
“These tariff wars are beginning to wear us out. It’s been very difficult to forecast what we will pay in duties and calculate any cost savings we’ve had this year,” writes a respondent in the apparel, leather & allied products industry.
Another respondent in the machinery sector says, “Currently, higher interest rates still depress the construction industry for new construction projects. Tariff policies are uncertain, which slows down (1) our investment in new projects, (2) component sourcing for new products, (3) blanket orders and (4) replenishment of large inventory quantities.”
