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IndustryNet Blog

U.S. manufacturing activity edges down in July

Posted by IndustryNet on Tuesday, August 1, 2017

100000076_welding-2262745_960_720U.S. manufacturing activity expanded at a steady clip in July, though at a somewhat slower rate than reported in June, according to new data released this morning by the Institute for Supply Management.

The ISM’s manufacturing index now stands at 56.3 – 1.5% lower than June’s 57.8, but still representative of a thriving U.S. industrial sector that is closing in on a full year of expansion. July’s reading marks the manufacturing sector’s 11th consecutive month of growth, and the 98th consecutive month of expansion for the U.S. economy as a whole.

The ISM’s Manufacturing Report on Business is a leading economic indicator based on a survey of the nation's supply executives. June’s reading of 57.8 was the highest level the Institute has recorded in 3 years with industrial production and new orders surging to record heights. July’s reading, though still in expansion territory, came in somewhat lower due to soft readings in new orders, production and employment.

Growth was reported in fifteen of eighteen industries reporting to the ISM, with rubber/plastics; electrical equipment, wood products, fabricated metals, and machinery leading increases.

Just three industries reported contraction in July: apparel, leather & allied products; textile mills; and petroleum products.

Overall, the ISM manufacturing activity report for July reflected expansion in the sector with multiple indicators growing at a steady clip.

New orders 

The new orders index soared four percentage points in June to 63.5%, after climbing two percentage points in May. In July, manufacturers reported 3% fewer new orders than in previous months, though the index remains in growth territory at 60.4%. This is the 11th consecutive month U.S. manufacturers have reported growth in new orders.

Fourteen out of eighteen industries reported an uptick in new orders, with plastics & rubber; electrical equipment; chemicals; and primary metals leading growth. Apparel, leather & allied products was the only industry to report an actual decrease in new orders.

Prices increase

The most significant change in July’s ISM report was the increase in raw materials cost. For the 17th consecutive month, prices paid for raw materials were on the rise according to the ISM. The Prices Paid index soared 7% to 62% in July from 55% in June, with 33% of respondents paying higher prices, 9% reporting lower prices, and 58% reporting that they paid similar prices as they had in June.

Higher prices were recorded in fourteen of eighteen industries, with the highest prices reported in nonmetallic minerals; paper products, furniture, primary metals, and food, beverage & tobacco products.

Apparel, leather & allied products was the only industry to report paying lower prices for raw materials in July.

Production, employment, exports slow

Though most other indicators tracked by the ISM reported growth in July, many grew at a slower rate than in June. The Production Index came in at 60.6% last month, down 1.8% from June’s 62.4 reading. The employment index stands at a robust 55.2%, 2 percentage points slower than June’s 57.2 reading. Hiring was strong in eleven out of eighteen industries, with paper products; food processing; plastics/rubber/ and chemicals reporting the strongest growth.

Exports also increased, but at a slower rate than in June, with the New Export Orders index standing at 57.5, down 2% from June. This is the seventeenth consecutive month exports in the U.S. have been in expansion territory, with apparel, leather & allied products; wood products; primary metals; paper products; and chemicals topping the list.

The Manufacturing ISM® Report On Business® is based on data compiled from purchasing and supply executives nationwide.

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