July ISM Manufacturing Index: Ongoing Growth, But Troubling Details

July ISM Manufacturing Index: Ongoing Growth, But Troubling Details

The Institute of Supply Managers (ISM) Manufacturing Index fell to 51.2 percent in July, below consensus forecasts. The closely watched index now sits at its lowest level over the life of its current 35-month expansion streak (>50), with nine of the index’s 18 component industry groups actually showing contraction (<50). “We have for some time been pointing to three headwinds confronting the manufacturing sector – an inventory overhang, trade policy, and a decelerating pace of motor vehicle sales – and the impacts of these headwinds are clear in the ISM survey and other data pertaining to the manufacturing sector,” according to Regions Bank Chief Economist Richard Moody. Trade tensions notwithstanding, the US manufacturing sector would still have strained to sustain the strong growth of the last two years, Moody says. “The danger now is that the expansion in the factory sector will end before it otherwise would have, and the details of the July data suggest we are correct in worrying about that being the case.”

 

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