The Manufacturing PMI, from ISM, was 46.8% in July, which was down 1.7 percentage points from 48.5% in June.
This makes the fourth month in a row, and the 20th time in 21 months of contraction in the industry.
"U.S. manufacturing activity entered deeper into contraction," said Timothy Fiore, chair of ISM's Manufacturing Business Survey Committee. "Demand was weak again, output declined, and inputs stayed generally accommodative. "Demand remains subdued, as companies show an unwillingness to invest in capital and inventory due to current federal monetary policy and other conditions.
"Production execution was down compared to June, likely adding to revenue declines, putting additional pressure on profitability," said Fiore. " Suppliers continue to have capacity, with lead times improving and shortages not as severe. "
He noted that 86% of manufacturing gross domestic product (GDP) contracted in July, up from 62%.
All six of the largest manufacturing industries — Machinery; Transportation Equipment; Fabricated Metal Products; Food, Beverage & Tobacco Products; Chemical Products; and Computer & Electronic Products — contracted in July.
Index readings are as follows:
- Supplier Deliveries Index registered 52.6%, 2.8 percentage points higher than the 49.8% recorded in June.
- Inventories Index registered 44.5%, down 0.9 percentage point compared to June's reading of 45.4%.
- New Orders Index registered 47.4%, 1.9 percentage points lower than the 49.3% recorded in June.
- Production Index registered 45.9% is 2.6 percentage points lower than June's figure of 48.5%.
- Prices Index registered 52.9%, up 0.8 percentage point compared to the reading of 52.1 % in June.
- Backlog of Orders Index registered 41.7%, equaling its June reading.
- Employment Index registered 43.4%, down 5.9 percentage points from June's figure of 49.3%.
The overall economy continued in expansion for the 51st month after one month of contraction in April 2020. (A Manufacturing PMI® above 42.5%, over a period of time, generally indicates an expansion of the overall economy.)
What Respondents Are Saying
- "Business is relatively flat — the same volume, but smaller orders." [Chemical Products]
- "Demand continued to soften into the second half of the year. Supply chain pipelines and inventories remain full, reducing the need for overtime. Geopolitical issues between China and Taiwan as well as the election in November remain weighing concerns." [Transportation Equipment]
- "Even though we are used to a seasonal reduction in business over the summer, consumer behavior is changing more than normal. Sales are lighter, and customer orders are coming in under forecasts. It seems consumers are starting to pull back on spending." [Food, Beverage & Tobacco Products]
- "Availability of parts is good, with small exceptions of missing materials here and there. Ordering is still well below typical levels as we continue to burn down inventory of raw goods, with 'normal' ordering trends expected to return sometime in the second half of 2024." [Computer & Electronic Products]
- "It seems that the economy is slowing down significantly. The number of sales calls received from new suppliers is increasing significantly. Our own order backlog is also diminishing. We are hoping for an increase in customer demand, or we will possibly need to make organizational changes." [Machinery]
- "Unfortunately, our business is experiencing the sharpest decline in order levels in a year. We were well below our budget target in June; as a result, it was the first month this year that we had negative net income." [Fabricated Metal Products]
- "Business is slowing, and we are taking cost actions." [Electrical Equipment, Appliances & Components]
- "Some markets that are usually unwavering are showing weakness. Weather is the common factor, but only so much." [Nonmetallic Mineral Products]
- "Our sales forecast for July and August are slow, but we're making every attempt to remedy that situation. Our medical end-user customers continue to meet their forecasts, which is promising." [Textile Mills]
- "Elevated financing costs have dampened demand for residential investment. This has reduced our need for component products and inventory." [Wood Products]
