U.S. manufacturing activity contracted at a slower rate in July, marking the sector’s ninth straight month of contraction, according to the latest survey of purchasing executives from the Institute for Supply Management.
The ISM reports its index of manufacturing activity edged up 0.4% to a reading of 46.4%, demonstrating that while the sector remains stuck in contraction, activity is declining at a slower rate compared to previous months.
Demand in the sector, while still in contraction, improved significantly in July, with the New Orders index climbing 1.7% to 47.3%. This follows a 3% increase in June.
Output, while still in contraction as well, also improved over the month, edging up 1.6% to a reading of 48.3%.
Said Timothy Fiore, Chairman of the ISM, “The U.S. manufacturing sector shrank again, but the uptick in the PMI indicates a marginally slower rate of contraction. The July composite index reading reflects companies continuing to manage outputs down as order softness continues.”
Related: How Outsourced Prospecting Can Help Your Manufacturing Business Survive an Uncertain Economy
On the jobs front, the ISM’s Employment Index fell deeper into contraction, declining 3.7% to a reading of 44.4%. Said Fiore, “Amid sentiment about when significant growth will return, panelists’ companies reduced production and continued to manage head counts down, to a greater extent than in previous months.”
Other Metrics from the ISM Report
• Supplier Deliveries Index: 46.1% (up 0.4 percentage point from June) - Indicates faster deliveries, possibly due to increased capacity in the supply chain.
• Inventories Index: 46.1% (up 2.1 percentage points from June) - Contracting at a slower rate, but inventories remain low.
• Customers’ Inventories Index: 48.7% (up 2.5 percentage points from June) - Indicates inventories are too low, but the situation is improving at a slower rate.
• Prices Index: 42.6% (up 0.8 percentage point from June) - Prices are still decreasing but at a slower pace.
• Backlog of Orders Index: 42.8% (up 4.1 percentage points from June) - The backlog of orders is still in contraction territory, but the rate of contraction slowed down.
• New Export Orders Index: 46.2% (down 1.1 percentage points from June) - Exports are still contracting, but the rate of contraction increased.
Just two out of eighteen industries reported growth in the month of July: petroleum and coal products and furniture and related products. Industries demonstrating the sharpest contraction included apparel, leather & allied products, plastic & rubber products, paper products, and textile mills.
What Manufacturers Are Saying About Business Conditions
Manufacturers across various industries expressed a grab bag of frustration and challenges, from weakened demand and labor shortages to frustration with inflationary market conditions and trade restrictions, while others report strong growth and cautious optimism for the future.
A respondent in the electrical equipment industry had this to say, “Semiconductor trade restrictions against China have negatively impacted our industrial business in North America.”
While another executive in the computer & electronic products sector reported, “Current U.S. market conditions of inflationary and recessionary tactics affecting overall business. Customers are reducing or not placing orders as forecast, (putting) internal focus on reducing financial liabilities and overhead costs.”
Meanwhile, this executive in the miscellaneous manufacturing industry reported “Sales remain higher than forecast. Supplier capacity issues remain an issue.”
While another in the machinery sector said, “Suppliers are starting to reach out looking for new business. Softening is occurring in the China markets.”
Looking ahead, one fabricated metals manufacturer had this to say: “Stable demand for the next four to six months, but longer-term uncertainty. While customer growth is projected, we cannot point to fundamentals that sustain it. Supply conditions are similar to pre-pandemic, except for energy and raw input costs. Logistics costs have settled, transit times continue to shorten and capacities at most suppliers are sufficient.”
Find & Attract New Business in the Industrial World
At MNI, Our goal is to help your business thrive, so whether you’re looking to advertise your products and services to manufacturers, needing to find new suppliers, or are looking to reach out to decision-makers in the manufacturing world, our industrial solutions are here to support your mission.
