US manufacturing sector slows modestly in July | Manufacturing News

Manufacturing activity in the United States continued to slow in July as more factories cut production in the face of falling orders and rising inventories.

The Institute for Supply Management’s factory activity gauge fell to 52.8, the lowest level since June 2020, from 53 a month earlier, data showed Monday. Readings above 50 indicate expansion, and the latest figure is compared to a median projection of 52 in a Bloomberg survey of economists.

The group’s output measure also fell to a more than two-year low, and its new orders gauge remained in contraction territory for a second month. The figures highlight weaker demand for commodities as the economy struggles for momentum.

“Panelists are now expressing concern over a slowing economy as new order rates contracted for the second month amid growing anxiety over excess inventory in the supply chain,” said said Timothy Fiore, chairman of the ISM’s manufacturing survey committee.

The ISM Factory Inventory Index rose to 57.3, the highest since 1984 and suggests inventories are piling up at more manufacturers. Although many producers have increased their inventories in the event of further supply chain disruptions, the increase may also suggest that some of the construction is unintentional.

Separate data from S&P Global this morning showed a buildup in finished goods inventories for the first time since October 2020. That group’s overall Factory Purchasing Managers’ Index last July slipped to 52.2, a two-year low.

Last year

The global ISM index is down nearly 11 points from its multi-decade high in March last year, when producers struggled to meet pent-up demand as the economy emerged from pandemic shutdowns. . Spending on goods has since slowed as consumer habits have begun to shift from goods to services.

Eleven manufacturing industries recorded growth in July, led by clothing, minerals, and petroleum and coal products. Seven industries reported a contraction, led by wood products, furniture and paper.

ISM and S&P Global manufacturing data are consistent with a general slowdown in other parts of the world. European factory activity fell last month and manufacturing output in Asia continued to weaken.

Purchasing managers’ indices for the four main members of the euro zone all indicated contraction, with a contraction confirmed for the whole region after an initial estimate on July 22. In Asia, China, South Korea and Taiwan were the hardest hit.

The July measure of prices paid for materials used in the production process – extremely high for much of the last year and a half amid supply and demand imbalances – plunged 18.5 points to the lowest level in almost two years. This is the largest decline since 2010 and likely reflects lower crude oil and metal prices.

Select ISM Industry Comments

“Inflation slows down activity. Overstock of raw materials due to past supply chain issues and slow ordering. ” – Chemical products

“Chip shortages persist; however, the Covid-19 lockdowns in China present even worse supply issues. – Transport equipment

“Rising inflation drives a stronger narrative around looming recession concerns. Many customers seem to be withdrawing orders in an effort to reduce inventory.” – Food & Beverage

“New order intake has slowed slightly; however, the logistical issues still need to improve. Long lead times for materials and labor shortages remain a major problem. – Machinery

“Our markets are still holding; however, I believe a downturn is ahead. We are cautious about going overboard with orders. Also, I believe the general market is at the start of a recession. – Wrought metals

“Current order books are full, but there have been signs of a slowdown from the fourth quarter.” – Plastics and rubber

Supplier delivery times have lengthened, according to data from purchasing managers, but at the slowest rate since before the pandemic. This, combined with the drop in orders, likely allowed companies to make progress on unfilled orders. The ISM measure of arrears fell to the lowest since June 2020.

(Adds ISM industry comments)

–With help from Chris Middleton.

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