Economic growth for U.S. manufacturing weakened in July for the fourth consecutive month, the Institute for Supply Management said today in a monthly report.
The Tempe, Ariz.-based group’s manufacturing index, known as the PMI, slipped to 51.2 percent last month. That was down from 51.7% in June. The index last rose in March when it stood at 55.3 percent. July’s PMI was the lowest since August 2016, when the index showed economic contraction in manufacturing.
The index is considered a leading indicator, providing a gauge for where manufacturing is heading. The ISM report is based on a survey of 350 purchasing and supply executives. A reading above 50 percent indicates a growing manufacturing economy. Below 50 percent indicates economic contraction. The PMI has been above 50 percent for 35 straight months.
The anemic index reading for July — barely into expansion — raises the question whether manufacturing is headed toward a recession. The institute, however, isn’t going that far.
“I’m not sure I’m ready to say we’re going to contract,” Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee, said on a conference call.
The Federal Reserve on July 31 cut interest rates by a quarter-point. The Fed last cut rates in 2008. The move was intended to keep the long-running U.S. economic expansion going. The 2008 rate reduction was part of a strategy to revive the U.S. economy during a severe recession.
In the ISM survey, nine of 18 industries reported economic growth in July. They included wood products and furniture. The nine reporting contraction included fabricated metal products, transportation equipment and miscellaneous manufacturing. The PMI has averaged 55.4 percent the past 12 months. It was as high as 60.8 percent in August 2018.
The group’s New Orders Index improved last month to 50.8 percent from 50 percent in June. Fiore described new orders as “really weak” and said they need to increase to spur manufacturing growth. Only seven of 18 industries reported a rise in orders.
“The big change is consumption side is weaker,” Fiore said. “There isn’t enough demand to work on.”
ISM’s Production Index slid to 50.8 percent in July, down from 54.1 percent the month before. Eight industries said output increased.
The institute’s Employment Index registered at 51.7 percent, down from 54.5 percent in June. Nine of 18 industries reported job gains.