US ISM Manufacturing PMI dropped from 48.5 to 46.8 in July, falling below the expected 48.8. This marks the fourth consecutive month of contraction for the manufacturing sector, with the decline accelerating.
New orders fell from 49.3 to 47.4, indicating that demand has not seen consistent growth since May 2022. Production also decreased significantly, dropping from 48.5 to 45.9, the lowest performance since May 2020. Employment saw a sharp decline from 49.3 to 43.4, reaching its lowest level since June 2020. Prices, however, rose slightly from 52.1 to 52.9.
Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee, commented, “After breaking a 16-month streak of contraction by expanding in March, the manufacturing sector has contracted the last four months, and at a faster rate in July.” Notably, none of the six biggest manufacturing industries registered growth in July.
Historically, the relationship between the Manufacturing PMI and the overall economy suggests that the July reading of 46.8 corresponds to a change of plus-1.2 percent in real GDP on an annualized basis.
