July’s PMI Shows Growth, But Not Much
Manufacturing continued to expand in July, but at a slower rate, reports the Institute for Supply Management, Tempe, Ariz., in its latest Manufacturing ISM Report on Business.
“The PMI registered 50.9 percent, a decrease of 4.4 percentage points, indicating expansion in the manufacturing sector for the 24th consecutive month, although at a slower rate of growth than in June. Production and employment also showed continued growth in July, but at slower rates,” says Bradley J. Holcomb, chairman ISM’s Manufacturing Business Survey Committee.
ISM’s New Orders Index registered 49.2 percent, indicating contraction for the first time since June 2009, when it registered 48.9 percent.
The rate of increase in prices slowed for the third consecutive month, dropping 9 percentage points in July to 59 percent. In the last three months combined, the Prices Index declined by 26.5 percentage points. “Despite relief in pricing, however, several comments suggest a slowdown in domestic demand in the short term, while export orders continue to remain strong,” Holcomb says.
Of the 18 manufacturing industries surveyed, 10 reported growth in July, including primary metals and fabricated metal products. Among the seven industries reporting contraction in July were electrical equipment, appliances and machinery.
At 50.9 percent, the PMI was just slightly above the 50 percent level that indicates growth, and it was the lowest reading since July 2009 when it registered 49 percent. A PMI in excess of 42.5 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 26th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 24th consecutive month, according to ISM’s methodology.
ISM's Employment Index registered 53.5 percent in July, which is 6.4 percentage points lower than the 59.9 percent reported in June. While this month represents the 22nd consecutive month of growth in manufacturing employment, the July reading is also the lowest reading since December 2009, when the index registered 53.2 percent. An Employment Index above 50.1 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics data on manufacturing employment.
ISM’s Inventories Index registered 49.3 percent in July, 4.8 percentage points lower than the 54.1 percent reported in June. An Inventories Index greater than 42.7 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis' figures on overall manufacturing inventories (in chained 2000 dollars).