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Economy in Brief

U.S. ISM Manufacturing Index Slips
by Tom Moeller  August 1, 2022

• Composite index, nevertheless, continues to indicate expansion.

• New orders decline but employment index improves.

• Price index falls sharply.

Factory sector activity continues to improve but the rate of expansion has cooled. The Composite Index of factory sector activity reported by the Institute for Supply Management (ISM) eased to 52.8 during July from 53.0 in June. The index stood at the lowest level since June 2020, down from a peak of 63.7 in March 2021. A reading of 52.0 had been expected in the Action Economics Forecast Survey.

The new orders index weakened to 48.0 last month from 49.2 in June. These figures are down from a high of 67.4 in December 2020, and both indicate lower order volumes. The production series fell to 53.5 from 54.9, indicating a slower rate of production increase. A lessened 24.9% of respondents reported higher orders levels while an increased 16.6% reported declines. The supplier delivery measure weakened to 55.2 from 57.3 in June. These figures represent the quickest pace of product delivery since January 2020 and the reading is down from 78.8 in May of last year.

Working higher last month was the employment index to 49.9 from 47.3 in June. These readings were down from 56.3 in in March. It was the third consecutive month of decline in overall jobs levels. A higher 22.0% of respondents indicated higher jobs levels while a fairly steady 18.6% reported a decline. Also rising was the inventories measure to 57.3 from 56.0 in June. It was the highest index level since July 1984.

Upward pressure on prices eased during July. The prices index declined to 60.0 (NSA) from 78.5 in June. The figure was down from a high of 92.1 in June 2021. A greatly lessened 41.5% of respondents reported higher prices while a higher 21.5% reported price declines.

In other series, the export reading improved to 52.6 last month from 50.7 in June, but it had fallen from 57.1 in February. The orders backlog measure fell to 51.3, down from a high of 70.6 in May of last year. The imports measure improved to 54.4 in July, up from a low of 48.7 in May.

The ISM figures are based on responses from over 400 manufacturing 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.

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