United States: Manufacturing sector expands at slightly weaker pace in July
August 1, 2017
The ISM manufacturing index fell slightly in July as a result of slower expansions in new orders, output and employment. The indicator fell to 56.3 in July from 57.8 in June, just under market expectations of a decline to 56.5. Nonetheless, the index still sits well above the 50-threshold that separates expansion from contraction in the U.S. manufacturing economy, which signals a solid pace of growth in the sector.
The prospects for the sector were lower than in June as the expansion in new orders eased, although the tone of respondents’ comments was still very optimistic and upbeat, with many of them noting strong demand both at home and abroad. Output growth slowed in July and so did backlogs of work, which prompted manufacturers to increase their staffing levels at a slightly slower rate than in June. However, survey participants repeatedly stressed increasing labor issues such as shortages of skilled workers and higher turnover rates. Regarding prices, raw material inflation accelerated to the fastest pace in three months in July.
The July ISM print, although lower than June’s, remained positive. In addition, the upbeat momentum in the manufacturing sector trails on the strong GDP growth posted in Q2.
Author: Lindsey Ice, Economist