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Manufacturing ISM® Stays Positive. But For How Long?

The ISM Manufacturing PMI® remains in positive territory but new orders and employment are in negative territory for the third month.
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ISM table and synopsis by permission.

ISM table and synopsis by permission.

Please consider the Manufacturing ISM® Report On Business® for July 2022.

Manufacturing PMI® Details

  • The U.S. manufacturing sector grew in July, as the Manufacturing PMI® registered 52.8 percent, 0.2 percentage point lower than the June reading of 53 percent.
  • The Manufacturing PMI® continued to indicate sector expansion and U.S. economic growth in July. Three of the five subindexes that directly factor into the Manufacturing PMI® (Production, Supplier Deliveries and Inventories) were in growth territory. 
  • ISM®’s New Orders Index dropped to 48 percent in July, a decrease of 1.2 percentage points compared to the 49.2 percent reported in June. This indicates that new order volumes contracted again after growing for 24 consecutive months. “Only one of the six largest manufacturing sectors — Computer & Electronic Products — increased new orders at a moderate level. Lead times remain at elevated levels, and fundamental raw material prices continue to persuade buyers to remain on the sidelines. 
  • The Production Index registered 53.5 percent in July, 1.4 percentage points lower than the June reading of 54.9 percent, indicating growth for the 26th consecutive month.
  • ISM®’s Employment Index registered 49.9 percent in July, 2.6 percentage points above the June reading of 47.3 percent. “The index contracted for the third straight month after an eight-month period of expansion
  • The delivery performance of suppliers to manufacturing organizations was slower in July, as the Supplier Deliveries Index registered 55.2 percent, 2.1 percentage points lower than the 57.3 percent reported in June. 
  • The Inventories Index registered 57.3 percent in July, 1.3 percentage points higher than the 56 percent reported for June. “Manufacturing inventories expanded at a faster rate compared to June, registering their highest level since July 1984, when the index registered 57.8 percent. 

The above items are from the ISM®. The following three ideas are mine.

Three Key Points

  1. Inventories are at their highest level since July 1984.
  2. New orders and employment contract for the third month.
  3. The backlog of orders is barely positive

This does not bode well for US manufacturing looking ahead.

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