U.S. Manufacturing Index Unexpectedly Indicates Accelerated Contraction In July

The Institute for Supply Management released a report on Thursday showing U.S. manufacturing activity unexpectedly contracted at an accelerated rate in the month of July.

The ISM said its manufacturing PMI fell to 46.8 in July from 48.5 in June, with a reading below 50 indicating contraction. Economists had expected the index to inch up to 48.8 percent.

With the bigger than expected decrease, the manufacturing PMI dropped to its lowest level since hitting 46.6 in November 2023.

The decline by the headline index came as the new orders index slid to 47.4 in July from 49.3 in June, while the production index slumped to 45.9 in July from 48.5 in June.

“Demand remains subdued, as companies show an unwillingness to invest in capital and inventory due to current federal monetary policy and other conditions,” said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

He added, “Production execution was down compared to June, likely adding to revenue declines, putting additional pressure on profitability.”

The report said the employment index also tumbled to 43.4 in July from 49.3 in June, indicating an accelerated contraction in employment in the manufacturing sector.

Meanwhile, the ISM said the prices index inched up to 52.9 in July from 52.1 in June, suggesting prices increased at a slightly faster rate.

The ISM is scheduled to release a separate report next Monday on service sector activity in the month of July. The services PMI is expected to rise to 51.0 in July from 48.8 in June, with a reading above 50 indicating growth.