U.S. ISM Manufacturing PMI Declines Sharply in July; Prices Rise Slightly

The ISM Purchasing Managers Index of activity in the manufacturing sector fell to 46.8 during July after declining to 48.5 in June from 48.7 in May, according to the Institute for Supply Management. Remaining below 50 except for one month, the index has indicated a contraction in U.S. manufacturing sector activity since November 2022. The index peaked at 64.0 in March 2021. A reading of 48.8 for last month had been expected in the Action Economics Forecast Survey.

All but one of the index components declined last month. Leading the downturn, the employment series plunged to 43.4 from 49.3 in June, down from its high of 51.1 in May. Ten percent of respondents (NSA) reported higher employment while 21.5% reported it lower. The production series followed as it weakened to 45.9 from 48.5 in June. It has fallen from a high of 66.8 in in March 2021. Fifteen percent of respondents reported higher production while 24.7% indicated a decline. The new orders index fell to 47.4 last month from 49.3 in June. It remained up, nevertheless, from the low of 45.4 in May. Nineteen percent (NSA) of respondents reported higher new orders while 28.0% indicated declines. The inventories eased to 44.5 from 45.4 in June. It was the lowest level since December. Twelve percent (NSA) of respondents reported higher inventories while 24.5% reported lower. Countering these declines, the supplier deliveries index rose to 52.6 in July from 49.8 as more respondents reported slower delivery speeds. Twelve percent of respondents reported a slowdown while 6.6% reported a quickening.

The prices index, which is not part of the composite series, edged up to 52.9 (NSA) last month from 52.1 in June. It remained beneath the April high of 60.9 but was well above the low of 39.4 in December 2022. The index peaked at 92.1 in June 2021 and averaged 46.6 last year. An increased 22.6% of respondents reported higher prices last month while 16.9% reported price declines.

In other series, the export order index edged higher to 49.0 last month from 48.8 in June. It was up from a low of 45.2 six months earlier. Nine percent (NSA) of respondents reported higher exports while 10.9% reported declines. The imports series was minimally changed at 48.6 after falling from 51.1 in May. These readings were down from the high of 53.0 in March. The order backlog index held steady at 41.7 (NSA) last month but remained above its low of 37.5 in May of last year.

The ISM figures are based on responses from over 400 purchasing executives from 20 industries, which correspond to their contribution to GDP in 50 states. These data are diffusion indexes where a reading above 50 indicates expansion. The figures from the Institute for Supply Management can be found in Haver's USECON database; further detail is found in the SURVEYS database. The expectations number is available in Haver's AS1REPNA database.