Aug 06, 2016
PMI index drops to 52.6 in July from 53.2 in June
U.S. manufacturers grew at a modestly slower rate in July but are still expanding at a pace that is likely to offer the broader economy more support, a survey of executives found.
The Institute for Supply Management said its manufacturing index dipped to 52.6 % last month from 53.2% in June, which marked a one-year high. Still, readings over 50% indicate more companies are expanding instead of shrinking.
The index has been positive for five straight months following five negative readings from October 2015 to February 2016.
Most executives said business is solid and that they’ve seen no impact from the Brexit vote. Some expressed worry about a U.S. presidential election that’s been marked by anti-corporate rhetoric in both parties.
“Seems to be a bit more optimism in the markets, but [the] U.S. presidential race might dampen the mood,” said an executive at a maker of plastics and rubber products.
The ISM’s new-orders index remained strong at 56.9%, down a few ticks from 57%. Production also rose faster as the index reached 55.4%.
Yet the employment gauge fell back into negative territory: 49.4% from 50.4%. Manufacturers have cut about 30,000 jobs in the past 12 months amid a slowdown in business.
They’ve been hurt by slow demand globally, a strong dollar that makes American goods more expensive and a big drop in purchases by companies in the huge energy business coping with cheaper oil prices.
Although other government reports show that orders are still on the softer side, manufacturers appear to weathered the worst of it. Orders began to accelerate in early 2016 and they are at the highest level since late 2014, the ISM index shows.
Heavy industry is unlikely to give the economy a big punch in the months ahead, but it probably won’t be as big of a drag.
Several executives said they are monitoring the fallout from the so-called Brexit vote in which the U.K. elected to leave the European Union. So far it has been a nonfactor.
“Brexit has not impacted our business thus far,” said an executive at a food manufacturer.
Source: MarketWatch