Manufacturing Down but Economy Up in July

Economic activity in the manufacturing sector contracted in July for the second time since July 2009; however, the overall economy grew for the 38th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

"The PMI registered 49.8 percent, an increase of 0.1 percentage point from June's reading of 49.7 percent, indicating contraction in the manufacturing sector for the second consecutive month, following 34 consecutive months of expansion,” said Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management Manufacturing Business Survey Committee. “The New Orders Index registered 48 percent, an increase of 0.2 percentage point from June and indicating contraction in new orders for the second consecutive month, but at a slightly slower rate.

“Both the Production Index and the Employment Index remained in growth territory, registering 51.3 percent and 52 percent, respectively. The Prices Index for raw materials registered 39.5 percent, an increase of 2.5 percentage points from the June reading of 37 percent, indicating lower prices on average for the third consecutive month. A growing number of comments from the panel this month reflect a slowdown in their businesses and general concern over increasing economic uncertainty."

Of the 18 manufacturing industries, seven reported growth in July in the following order: Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Primary Metals; Petroleum & Coal Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; and Furniture & Related Products. The 11 industries reporting contraction in July — listed in order — are: Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Wood Products; Textile Mills; Miscellaneous Manufacturing; Chemical Products; Transportation Equipment; Printing & Related Support Activities; Paper Products; Machinery; and Computer & Electronic Products.

Here’s a sampling of executive quotes, by industry sector:

"Business has been up for the last seven consecutive months — strong customer orders coming in." (Machinery)

"Automotive demand remains strong." (Fabricated Metal Products)
"Resin pricing has bottomed out so customer orders have increased; it was pent-up demand." (Plastics & Rubber Products)

"We have noticed a marked slowing in business overall. [We] have confirmed this with other companies in our industry as well." (Wood Products)

"Forecasts remain high, but actual bookings remain flat." (Computer & Electronic Products)

"Taking a conservative approach to spending including hiring, travel and inventory. U.S. economy seems stuck — at best — with little to no growth." (Apparel, Leather & Allied Products)

"Business remains surprisingly strong." (Primary Metals)
"Continued slowdown in government military sector spending in advance of the presidential elections has seriously impacted business performance." (Transportation Equipment)

"Business is softening, requiring some down production days." (Furniture & Related Products)

"General state of business this month is flat, with increasing economic uncertainty." (Chemical Products)

Related Editorial:

Material Handling Equipment Manufacturers Forecast Raises Recession Risk

Transport and Logistics M&A Lively in 2012’s First Half

U.S. Manufacturers More Upbeat about Domestic than Global Economy

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