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PMI Index Falls from 55.3 to 50.9 in July

Drop in key economic indicator confirms slowdown in manufacturing activity.

A newly released survey from the Institute for Supply Management shows the latest PMI Index—a measurement of confidence among inventory managers—fell from 55.3% in June to 50.9% in July, and is down from a high of 61.4% in February. While this still indicates growth in manufacturing (a reading above 50 percent indicates that the manufacturing economy is generally expanding, while a figure below 50 percent reflects general contraction), it confirms many analysts’ views that manufacturing—the engine that has been driving the U.S. economy as we climb out of this recession—has been losing steam.

Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management Manufacturing Business Survey Committee, confirmed that the manufacturing sector—although above 50 on the PMI Index for the 24th consecutive month—grew at a slower rate of growth than witnessed in June. Worse, the “New Orders Index” registered 49.2 percent, indicating contraction for the first time since June of 2009, when it registered 48.9 percent. On the upside, exports still remain strong, Holcomb noted.

CATEGORY SUMMARIES

Among the nine industries reporting growth in new orders in July—listed in order—are as follows: petroleum & coal products; wood products; paper products; furniture & related products; transportation equipment; food, beverage & tobacco products; fabricated metal products; computer & electronic products; and chemical products. Meanwhile, the seven industries reporting decreases in new orders in July—listed in order—are: apparel, leather & allied products; plastics & rubber products; textile mills; electrical equipment, appliances & components; nonmetallic mineral products; miscellaneous manufacturing; and machinery.

RESPONDENTS OBSERVATIONS

  • "Inflation pressures have finally slowed down." (Chemical Products)
  • "With products sold internationally, the business conditions we are currently experiencing are declining from abnormally [high] record-breaking levels. Business conditions are currently flattening to more normal volumes, while trending slightly downward." (Machinery)
  • "Market conditions — Europe weak, U.S. soft, Asia strong." (Computer & Electronic Products)
  • "Demand from automotive manufacturers continues to improve." (Fabricated Metal Products)
  • "Export sales very strong, while domestic sales are sluggish." (Paper Products)
  • "The looming debt ceiling has government agencies backing away from spending. Forecasting a slowdown in demand in the short term." (Transportation Equipment)
  • "Generally seeing a slowdown, which is typical this time of year. Hopeful that this is seasonal only." (Plastics & Rubber Products)
  • "Most industrial customers seem to be sustaining their business. Export orders continue to remain strong. Price pressures persist, especially with commodity materials." (Chemical Products)

The complete July PMI Index report is available online.

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