Manufacturing growth slows but remains strong: ISM

Economic activity in the manufacturing sector expanded in July for the 12th consecutive month, and the overall economy grew for the 15th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

08/03/2010


Economic activity in the manufacturing sector expanded in July for the 12th consecutive month, and the overall economy grew for the 15th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

"Manufacturing continued to grow during July, but at a slightly slower rate than in June. Employment, supplier deliveries and inventories improved during the month and reduced the impact of a month-over-month deceleration in new orders and production,” said Norbert J. Ore, chair of the Institute for Supply Management Manufacturing Business Survey Committee. “July marks 12 consecutive months of growth in manufacturing, and indications are that demand is still quite strong in 10 of 18 industries. The prices that manufacturers paid for their inputs were slightly higher but stable, with only a few items on the short supply list."

A PMI in excess of 42%, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 15th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 12th consecutive month.

"The past relationship between the PMI and the overall economy indicates that the average PMI for January through July (58%) corresponds to a 5.4% increase in real gross domestic product,” Ore said. “In addition, if the PMI for July (55.5%) is annualized, it corresponds to a 4.5% increase in real GDP annually."

Manufacturing continued to grow in July as the PMI registered 55.5%, a decrease of 0.7 percentage point when compared to June's reading of 56.2%. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.

A number of industry sectors weighed in on the growth in their markets as part of the ISM report. Their comments included:

  • "Business in July was strong, the best month since October 2008." (Fabricated Metal Products)
  • "Slow economy has killed sales for new equipment orders." (Machinery)
  • "Quoting activity and sales are slow, and backlog is dropping." (Computer & Electronic Products)
  • "Business continues to be sluggish and has fallen slightly as the economic ills continue." (Nonmetallic Mineral Products)
  • "Retailers are still unwilling to gamble on inventory." (Printing & Related Support Activities)


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Before the calendar turned, 2016 already had the makings of a pivotal year for manufacturing, and for the world.

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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.

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