Manufacturing PMI Falls to 25-Month Low - Modern Distribution Management

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Manufacturing PMI Falls to 25-Month Low

It was the slowest expansion since June 2020 as prices took a major month-to-month decline while employment posted improvement.

The latest industrial economic red flag appeared on Aug. 1 when the Institute for Supply Management released its monthly manufacturing Purchasing Managers Index (PMI) — widely regarded as a reliable barometer for the health of the U.S. industrial sector.

ISM’s July PMI showed a figure of 52.8% — its lowest mark since June 2020’s 52.4% during the height of nationwide factory shutdowns amid the worst of COVID-19’s business impacts. July’s reading was 0.2 percentage down points from June.

For the index, any reading above 50.0% indicates expansion, while anything less indicates contraction. July’s reading shows that while the industrial economy expanded for a 26th consecutive month, it was at its slowest pace since that mid-2020 mark.

Within the PMI, indices for new orders, production, prices, backlog and supplier deliveries all saw month-to-month declines. The New Orders Index fell 1.2 points to 48.0%; the Production Index fell 1.4 points to 53.5; the Prices Index fell a whopping 18.5 points 60.0% — its lowest reading since August 2020’s 59.5%; The Backlog of Orders Index fell 1.9 points to 51.3%; and the Supplier Deliveries Index fell 2.1 points to 55.2%.

Indices for employment, inventories, customer inventories, new export orders and imports each saw a month-to-month increase in July. The index for Employment improved 2.6 points to 49.9%; the Inventories Index increased 1.3 points to 57.3%; the Customer Inventories Index increased 4.3 points to 39.5%; the New Export Orders Index gained 1.9 points to 52.6%; and the Imports Index grew 3.7 points to 54.4%.

“The U.S. manufacturing sector continues expanding — though slightly less so in July — as new order rates continue to contract, supplier deliveries improve and prices soften to acceptable levels,” commented Timothy Fiore, CPSM, C.P.M., Chair of the ISM Manufacturing Business Survey Committee.

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