Economic activity in the U.S. manufacturing sector grew in July, with the overall economy notching a 14th consecutive month of growth, the nation’s supply executives said in the latest Manufacturing Institute for Supply Management (ISM) “Report On Business.”
Textiles mills did not partake in the good fortune, however, reporting declines in manufacturing growth, new orders and production.
“The July Manufacturing PMI (Purchasing Managers Index) registered 59.5 percent, a decrease of 1.1 percentage points from the June reading of 60.6 percent,” Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee, said. “This figure indicates expansion in the overall economy for the 14th month in a row after contraction in April 2020.”
A Manufacturing PMI above 43.1 percent, over a period of time, generally indicates an expansion of the overall economy.
In a separate report on Monday, Joel Prakken, chief U.S. economist at IHS Markit, said despite another downward revision to the IHS Markit forecast of real gross domestic product (GDP) growth in 2021, and emerging risks posed by the spread of the delta strain of the coronavirus, the current economic recovery remains on solid footing.
“Strong final demand and lean inventories–against the backdrop of expansionary monetary and fiscal policy–support our forecast of 6.1 percent GDP growth this year and 4.4 percent next year,” Prakken said. “Near-term price pressures will push consumer price inflation to 4.2 percent this year. We expect reversals in the prices of food, energy and vehicles to limit CPI 9Consumer Price Index) inflation to 2.4 percent in 2022.”
ISM’s Fiore said Business Survey Committee panelists reported that their companies and suppliers continue to struggle to meet increasing demand levels.
“As we enter the third quarter, all segments of the manufacturing economy are impacted by near record-long raw-material lead times, continued shortages of critical basic materials, rising commodities prices and difficulties in transporting products,” he said. “Worker absenteeism, short-term shutdowns due to parts shortages and difficulties in filling open positions continue to be issues limiting manufacturing-growth potential. Optimistic panel sentiment remained strong, with 13 positive comments for every cautious comment.”
Except textile mills, the other 17 manufacturing industries reported growth in July, including apparel, leather and allied products, and furniture and related products.
ISM’s New Orders Index registered 64.9 percent in July, down 1.1 percent from June. This indicates that new orders grew for the 14th consecutive month. A New Orders Index above 52.8 percent is generally consistent with an increase in the Census Bureau’s series on manufacturing orders.
Of the 18 manufacturing industries, 15 reported growth in new orders in July, led by furniture and related products. The only industry reporting a decline in new orders in July was textile mills, while apparel and leather products reported flat orders.
The Production Index registered 58.4 percent in July, 2.4 percentage points lower than the June reading of 60.8 percent, indicating growth for the 14th consecutive month. An index above 52.1 percent is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures. The only industry reporting decreased production in July again was textile mills, with 16 industries reporting growth in production.
The delivery performance of suppliers to manufacturing organizations was slower in July, as the Supplier Deliveries Index registered 72.5 percent, 2.6 percentage points lower than the 75.1 percent reported in June and the second straight month of slowing expansion. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.
All 18 industries reported slower supplier deliveries in July, led by apparel, leather and allied products, and furniture and related products and including textile mills.
The Inventories Index registered 48.9 percent in July, 2.2 percent lower than the 51.1 percent reported for June, reversing two months of expansion. An Inventories Index greater than 44.5 percent, is generally consistent with expansion in the Bureau of Economic Analysis (BEA) figures on overall manufacturing inventories.
“Inventories remain unstable due to ongoing supplier constraints, as demonstrated by the index returning to contraction,” Fiore said. “In July, supplier delivery rates were not able to keep up with production levels, causing a draw down in inventory levels.”
An Inventories Index greater than 44.5 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis (BEA) figures on overall manufacturing inventories.
The 10 industries reporting higher inventories in July were led by apparel, leather and allied products, textile mills and furniture and related products.
The ISM Prices Index registered 85.7 percent, a decrease of 6.4 percent from June, indicating raw-materials prices increased for the 14th consecutive month but at slower levels.
A Prices Index above 52.7 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Producer Price Index for Intermediate Materials.
In July, all 18 industries reported paying increased prices for raw materials, led by apparel, leather and allied products, and including furniture and related products, and textile mills.