Manufacturing Dips Slightly in July

Manufacturing slowed slightly in July but still ran at a strong rate overall, the Institute for Supply Management said today.

The Tempe, Ariz.-based group’s manufacturing index, known as the PMI, registered at 52.8 percent last month, down from 53 percent in June.

“I think we had a very strong month,” Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee, said on a conference call. “We’re still looking good through the rest of the year.”

The index is based on a survey of executives in 18 industries. A PMI above 50 percent indicates the manufacturing economy is expanding. Below that mark indicates contraction.

The index has been in positive territory for 26 consecutive months. The PMI has averaged 57.6 percent over the past 12 months. The July PMI was the lowest during that period.

In July, 11 industries reported economic growth. They included apparel, petroleum & coal products, transportation equipment and machinery. Seven industries reported contraction, including wood products, fabricated metal products and machinery.

The PMI is viewed as a barometer of where manufacturing is headed. Today’s report came out amid recession fears as the Federal Reserve increases interest rates to combat inflation. The U.S. gross domestic product has shrunk the two past quarters.

Some of the components of the PMI were mixed.

The group’s New Orders Index fell to 48 percent in July, down from 49.2 percent the month before. Four of 18 industries reported gains in orders. Seven industries reported declines and the other seven reported no change.

Despite the July results, Fiore said the New Orders Index still is above recessionary levels. Typically, he said, the index goes below 40 percent during a recession. “We’re nowhere near that,” Fiore said.

ISM’s Production Index slipped to 53.5 percent last month compared with 54.9 percent in June. Five industries indicated output gains. Six reported declines in production. Seven reported no change.

The Employment Index improved to 49.9 percent in July compared with 47.3 percent the month before. Eight industries reported job gains, six reported job cuts.

ISM’s survey also indicated manufacturers are reducing backlogs, Fiore said.

“We’re pretty much stable what we can produce,” he said. “The general ability to deliver is better.”