The manufacturing sector expanded in July, according to supply executives in the latest Manufacturing ISM Report on Business. The July PMI was 52.7 percent, a decrease of 0.8 percentage points from the June reading.
The New Orders Index registered 56.5 percent, an increase of 0.5 percentage point from the reading of 56 percent in June. The Production Index registered 56 percent, 2 percentage points above the June reading of 54 percent.
The Employment Index registered 52.7 percent, 2.8 percentage points below the June reading of 55.5 percent, reflecting growing employment levels from June but at a slower rate.
A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.
Of the 18 manufacturing industries, 11 are reporting growth in July in the following order: Textile Mills; Paper Products; Apparel, Leather & Allied Products; Printing & Related Support Activities; Furniture & Related Products; Fabricated Metal Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Transportation Equipment; and Miscellaneous Manufacturing. The five industries reporting contraction in July are: Wood Products; Primary Metals; Plastics & Rubber Products; Chemical Products; and Machinery.
“Inventory cutting is evident in the report; this is an expected reaction to a buildup during the weak first half of the year,” said Daniel J. Meckstroth, chief economist for the MAPI Foundation, the research affiliate of the Manufacturers Alliance for Productivity and Innovation. “A major downside to the July ISM report is that the manufacturing trade deficit continues to worsen. Imports are growing and exports are declining. The increase in the value of the dollar and the strong U.S. growth relative to other advanced economies are both unbalancing trade. Foreign trade will be a major drag on manufacturing activity and the general economy this year and next."
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