US Manufacturing activity grew in July. However, the rate of growth slowed down for the second consecutive month.
Data released from the Institute for Supply Management on Monday showed that its national factory activity index declined to 59.5 in July from the 60.6 recorded in June. A reading above 50 indicates an economy in expansion, whilst readings under 50 indicate an economy in contraction.
July’s reading was the lowest since January this year and below the market expectations for a reading of 60.9.
Bottlenecks Impacting US Manufacturing Activity
Chris Low, the chief economist at FHN Financial in New York, said of today’s economic news:
“Manufacturing is slowing from unsustainable boom to sustainable strength,”
“Moderation in supplier deliveries and prices paid indicate bottlenecks are alleviating, but both remain high enough to indicate supply-side problems persist. Still, from a market and policy perspective, progress is important.”
The ISM data is a keenly watched indicator because manufacturing in the US accounts for 11.9% of the total US economy – the largest economy in the world.
The ISM survey’s forward-looking new orders sub-index declined to a reading of 64.9 in July from the 66.0 recorded in June. July’s figure was the second successive monthly decline.
Meanwhile, The ISM survey’s measure of prices paid by manufacturers dropped to a reading of 85.7 in July, down from the 92.1 reached in June, which was an all-time high. The decline from June to July was the largest pullback in the index since March 2020.
In total, 17 out of 18 manufacturing industries reported growth in the last month. These industries included furniture and related products, computer and electronic products, machinery and fabricated metal products. The only manufacturing industry that recorded a decline was textile mills.
