ISM Report: Manufacturing slumps for second straight month
ISM index hovers just below 50 as uncertainty slows growth
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 report was issued Aug. 1 by Bradley J. Holcomb, chair of the Institute for Supply Management Manufacturing Business Survey Committee. The PMI registered 49.8%, an increase of 0.1 percentage point from June's reading of 49.7%, indicating contraction in the manufacturing sector for the second consecutive month, following 34 consecutive months of expansion.
The New Orders Index registered 48%, 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% and 52%, respectively. The Prices Index for raw materials registered 39.5%, an increase of 2.5 percentage points from the June reading of 37%, 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,” Holcomb said.
Manufacturing contracted in July as the PMI registered 49.8%, an increase of 0.1 percentage point when compared to June's reading of 49.7%. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.
A PMI in excess of 42.6%, over a period of time, generally indicates an expansion of the overall economy. Therefore, the July PMI indicates growth for the 38th consecutive month in the overall economy, but indicates contraction in the manufacturing sector for the second time since July 2009, when the PMI registered 49.2%.
The last 12 months of PMI
Average for 12 months – 52.5
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Before the calendar turned, 2016 already had the makings of a pivotal year for manufacturing, and for the world.
There were the big events for the year, including the United States as Partner Country at Hannover Messe in April and the 2016 International Manufacturing Technology Show in Chicago in September. There's also the matter of the U.S. presidential elections in November, which promise to shape policy in manufacturing for years to come.
But the year started with global economic turmoil, as a slowdown in Chinese manufacturing triggered a worldwide stock hiccup that sent values plummeting. The continued plunge in world oil prices has resulted in a slowdown in exploration and, by extension, the manufacture of exploration equipment.
Read more: 2015 Salary Survey