U.S. economic improvement slowed in July

Economic activity in the manufacturing sector expanded in July for the 24th consecutive month and the economy as a whole grew for the 26th consecutive month, according to the latest Manufacturing Institute of Supply Management’s (ISM) Report on Business. Petroleum and coal products reported the sixth-highest growth in July out of 18 manufacturing industries reporting growth.

The PMI registered 50.9 percent, a decrease of more than 4 percentage points from June’s reading. The PMI also posted its lowest reading since July 2009, when it registered 49 percent. A reading above 50 percent indicates the manufacturing economy is generally expanding. A PMI in excess of 42.5 percent over a period of time generally indicates overall economic expansion.

The New Orders Index registered 49.2 percent in July, a decline of more than 2 percentage points compared to June. It also marked the first month of contraction in the index since June 2009. The petroleum and coal products industry reported the highest growth in new orders in July out of nine industries.

The Production Index registered 52.3 percent in July. That was a decrease of more than 2 percentage points from June, although it was the 26thconsecutive month the index registered above 50 percent.

The Employment Index was 53.3 percent in July, 6 percentage points lower than the 59.9 percent reported in June. The July reading was the lowest since December 2009, but it is also was the 22nd consecutive month of workforce growth. Petroleum and coal products reported the largest decline in employment for the month out of five industries.

Suppliers’ delivery performances slowed in July, the 26th consecutive month the indicator has been slow. The Supplier Deliveries Index registered at 50.4 percent, almost 6 percentage points lower than June and the 26th consecutive month the index has been above 50 percent, indicating slower deliveries. Petroleum and coal products reported the lowest measure of supplier deliveries among nine industries.

The Inventories Index registered 49.3 percent in July,almost 5 percentage points lower than June. Petroleum and coal products reported a decrease in inventories for the month, one of nine industries that reported drops in inventories.

The Customers’ Inventories Index registered 44 percent in July, 3 percentage points lower than in June and the 28th consecutive month the index has been below 50 percent. The July index reading indicated that respondents believe their customers’ inventories are too low. Petroleum and coal products industry reported the lowest customers inventories out of 10 industries.

The Prices Index registered 59 percent in July, 9 percentage points lower than June’s reading and the third consecutive month the index has registered below 80 percent since December 2010. It also was the 25th consecutive month the index has settled above 50 percent. While 35 percent of executive respondents reported paying higher prices and 17 percent reported paying lower prices, 48 percent reported paying the same prices as in June. Ten industries, including the petroleum and coal products industry, reported  increased prices being paid.

The Backlog of Orders Index registered 45 percent in July, 4 percentage points lower than the 49 percent reported in June.  Petroleum and coal products reported the biggest order backlogs out of four industries.

The New Export Orders index recorded 54 percent in July, slightly less than June’s reading. This is the 25th consecutive month of growth in the index.

Imports of materials by manufacturers continued to expand in July as the index registered 53.3 percent, more than 2 percentage points higher than the 51 percent reported in June and the 23rd consecutive month of growth in imports.

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