U.S. manufacturing activity posted a second straight month of expansion in July as more businesses reopened and new orders rose, according to the Institute for Supply Management’s monthly Report on Business.
According to the ISM, U.S. manufacturing activity edged up another 1.6% in July, following June’s historic rebound. The index now stands at 54.2%, well into expansion territory and the highest the index has been since March 2019.
In June, the ISM’s index posted a gain of 9.5%, rocketing back into expansion following the pandemic's historic contraction.
The increase in activity was led by new orders and production, though employment remained stuck in contraction. Supplier deliveries eased back, raw materials inventories continued to contract, while exports and imports grew.
Said Timothy Fiore, Chairman of the ISM: “In July, manufacturing continued its recovery after the disruption caused by the coronavirus pandemic. Panel sentiment was generally optimistic (two positive comments for every one cautious comment) continuing a trend from June…The growth cycle continues for a second straight month after three prior months of COVID-19 disruptions. Demand and consumption continue to drive expansion growth, with inputs remaining at parity with supply and demand.”
Of eighteen industries, thirteen reported growth in July, led by wood products; furniture & related products; textile mills; printing & related support activities and food, beverage & tobacco products.
The three industries posting declines included transportation equipment; machinery; and fabricated metal products.
New Orders Soar
After surging by a record 24.6% in June, the new orders index climbed another 5.1% and now stands at 61.5%, well above the 50% line that indicates expansion. Comments from executives on new orders and demand were mixed, however.
“Orders [are] starting to pick up,” said one respondent in the chemicals sector. “[An] increase of about 35 percent to 40 percent.”
While another in the furniture & related products industry commented “Incoming orders are slow. This is usually our busiest time of the year, but production is reduced due to lack of demand. Additional layoffs expected.”
Thirteen of eighteen industries reported an uptick in new orders for July, led by wood products; furniture & related products; primary metals; plastics & rubber products; chemical products and electrical equipment.
Manufacturing Production Surges
The ISM’s Production Index spiked another 4.8% in July, following June’s historic increase of 24.1%. The production index now sits at 62.1%, with sixteen of eighteen industries reporting growth in production in July.
Industries posting the strongest growth included textile mills; furniture & related products and printing & related support activities.
Employment Contracting at a Slower Rate
Hiring and employment remained a soft spot in the ISM’s report last month, with the index sitting at a contractionary 44.3% in July. Notably, however, employment is contracting at a slower rate, with the index edging up 2.2% over June’s reading of 42.1%.
Only five of eighteen industries reported an increase in hiring for the month of July, led by apparel, leather & allied products; printing & related support activities and furniture & related products.
Said one respondent in the transportation equipment sector: “Overall business remains down almost 70%. We are hanging on to as many employees as possible, but we will have to lay off 30% or more for at least two or three months until September or October.”
Tried-and-True Industrial Solutions
As providers of industrial information since 1912, we’ve seen the ups and downs of U.S. manufacturing, providing much-needed industrial information to our customers during the Great Depression, World War II, and beyond.
We understand how much our customers rely on our industrial solutions for their everyday operations. At MNI, Our goal is to help your business thrive, so whether you’re looking to advertise your products and services to manufacturers, need to find new suppliers, or are looking to reach out to decision-makers in the manufacturing world, our industrial solutions are here to support your mission.
