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Business of Engineering

Manufacturing index grows for third straight month

The Institute for Supply Management's purchasing manufacturers' index reported a 1.6% increase to 54.2%, which is the third straight month of growth.

By Chris Vavra August 3, 2020
Courtesy: CFE Media and Technology

Economic activity in the manufacturing sector grew in July, with the overall economy notching a third consecutive month of growth, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business. The index registered 54.2, an increase of 1.6 percentage points in June.

Timothy R. Fiore, CPSM, C.P.M., chair of the Institute for Supply Management (ISM) manufacturing business survey committee, said in a press release: “This figure indicates expansion in the overall economy for the third month in a row after a contraction in April, which ended a period of 131 consecutive months of growth.”

New orders index registered 61.5%, an increase of 5.1 percentage points from June. The production index registered 62.1%, up 4.8 percentage points compared to June. The backlog of orders index registered 51.8%,  an increase of 6.5 percentage points compared to June. Employment index registered 44.3%, an increase of 2.2 percentage points from June. The Supplier Deliveries Index registered 55.8%, down 1.1 percentage points from June.

“In July, manufacturing continued its recovery after the disruption caused by the coronavirus (COVID-19) pandemic,” Fiore said. “Panel sentiment was generally optimistic (two positive comments for every one cautious comment), continuing a trend from June.”

Inputs — expressed as supplier deliveries, inventories and imports — weakened for the third straight month, due to supplier delivery issues abating and import levels re-entering expansion. Inventory levels contracted due to strong production output, supplier delivery difficulties and inventory minimization. Inputs contributed negatively (a combined 4.6-percentage point decrease) to the PMI calculation but were more than offset by the demand and consumption improvement, as was the case in June.

“The growth cycle continues for the second straight month after three prior months of COVID-19 disruptions,” Fior said. “Demand and consumption continued to drive expansion growth, with inputs remaining at parity with supply and demand. Among the six biggest industry sectors, food, beverage & tobacco products remains the best-performing industry sector, with chemical products, computer & electronic products and petroleum & coal products growing respectably. Transportation equipment and fabricated metal products continue to contract, but at soft levels.”


Chris Vavra
Author Bio: Chris Vavra is an associate editor for CFE Media.