U.S. manufacturing activity continued to contract in July, marking the fifth consecutive month of decline. The sector experienced a brief two-month expansion and, before that, a 26-month recession.
The Institute for Supply Management (ISM) report suggests that manufacturers are grappling with persistently weak demand, the damaging impact of tariffs, and accelerating layoffs.
Susan Spence, Chair of the ISM Manufacturing Business Survey Committee, said the July manufacturing Purchasing Managers' Index (PMI) was 48.0%, down 1 percentage point from 49.0% in June. A reading below 50 indicates contraction in the manufacturing sector, but the overall U.S. economy remains in expansion, now at 63 consecutive months of growth. The decline in the PMI was primarily driven by declines in the supplier deliveries index and the employment index.
July Core Indicators Overview
Manufacturing PMI: 48.0%, in contraction for the fifth consecutive month;
New Orders Index: Contracted for the sixth consecutive month (47.1%), up 0.7 percentage points from 46.4% in June, with surveyed manufacturers continuing to report weak demand;
Production Index: Jumped to 51.4% (up 1.1 percentage points from June), expanding for the second consecutive month;
Employment Index: Contracted for the sixth consecutive month, at 43.4%, down 1.6 percentage points from 45.0% in June, as companies continued to reduce their workforce.
Supplier Delivery Index: Falling below 50% for the first time in eight months, indicating inventory shortages. The growth line was 49.3%, down 4.9 percentage points from 54.2% in June. A reading below 50% indicates faster delivery.
The inventory index remained in contraction territory at 48.9%, down 0.3 percentage points from 49.2% in June.
The customer inventory index fell to 45.7%, down 1.0 percentage point from 46.7% in June, remaining in the "too low" range, a condition generally considered a positive sign for future production.
The price index remained in expansion territory (increasing) for the tenth consecutive month, reaching 64.8% in July, down 4.9 percentage points from 69.7% in June. Raw material price growth slowed.
The order backlog index was 46.8%, up 2.5 percentage points from 44.3% in June, but remained in contraction territory for the 34th consecutive month.
The New Export Orders Index remained in contraction territory for the fifth consecutive month, at 46.1%, down 0.2 percentage points from 46.3% in June.
The Import Index also remained in contraction territory, at 47.6%, up 0.2 percentage points from 47.4% in June (still below the 50% threshold for growth and contraction).