U.S. manufacturing sector contracts for the second time since July 2009, as inventory and new orders slow but production and employment remain in growth mode
Manufacturing activity in the United States slowed for the second straight month in July, as the Institute for Supply Management’s Purchasing Manager’s Index remained below the 50-point threshold indicating growth.
July’s PMI registered 49.8, up slightly from June’s 49.7 reading, but still indicating contraction—the second time the index has fallen below 50 since July 2009. The new orders index remained below 50 as well, inching up 0.2 percent to 48, but remaining in contraction mode for the second straight month as well.
ISM’s production and employment indices remained in positive territory, however, registering 51.3 and 52, respectively. And raw materials prices fell for the third straight month, ISM leaders said.
The results come amid growing uncertainty over the economy at home and abroad.
“… A growing number of comments from the panel this month reflect a slowdown in their businesses and general concern over increasing economic uncertainty,” Bradley J. Holcomb, chairman of ISM’s Manufacturing Business Survey Committee, said in announcing the results August 1.
The news follows 34 straight months of growth in the manufacturing sector and came on the heels of an increase in durable goods orders for June. Still, concern over the slow economic recovery in the United States is mixing with global worries, such as the banking crisis in Europe, to create an even more cautious business climate.
“A wave of optimism swept over the industrial sector earlier in 2012, but unfortunately, in its wake are concerns about the future slow pace of U.S. economic growth, worries about Europe’s banking crisis, and uncertainty about the resolution of the federal fiscal cliff,” Daniel J. Meckstroth, vice president and chief economist for the Manufacturer’s Alliance for Productivity and Innovation, said in analyzing the durable goods numbers in late July. “Even extremely low interest rates are not enough to incentivize businesses to make long-term commitments when there is so much uncertainty and risk.”