- A closely watched gauge of US manufacturing improved for the third month straight in July while still grappling with weak employment activity.
- The Institute for Supply Management’s purchasing managers’ index climbed to 54.2 last month from 52.6, marking the industry’s fastest rate of growth since March 2019.
- Its employment gauge gained to 44.3 from 42.1, remaining well below the threshold of 50 that indicates whether a sector is growing or shrinking.
- “This does not mean the recovery in the manufacturing sector is complete,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said, adding that weak business investment means a full manufacturing recovery “is a long way off.”
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A popular metric for US manufacturing activity posted its third-straight month of growth in July as the industry continued to climb out of its virus-prompted slump.
The Institute for Supply Management’s purchasing managers’ index improved to 54.2 from 52.6, marking the manufacturing industry’s fastest rate of expansion since March 2019. The organisation’s gauge of new orders improved 5.1 points to 61.5, and its Production Index gained to 62.1 from 57.3.
Readings above 50 indicate industry growth, while those falling below the threshold signal contraction. ISM’s employment metric remained deep in contractionary territory, climbing to 44.3 last month from 42.1.
The report signals continued recovery among manufacturers even as coronavirus cases skyrocketed throughout the US. Still, the uptrend’s pace faces new downside risks as Congress stalls in passing new stimulus and fresh outbreaks threaten to reinstate lockdowns.
“This does not mean the recovery in the manufacturing sector is complete,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note. “The extreme weakness of business capital spending means that a full recovery in manufacturing is a long way off.”
Of the 18 manufacturing industries tracked by the institute, 13 reported growth. The three industries contracting over the month were transportation equipment, machinery, and fabricated metal products.
Separately, a PMI from data firm IHS Markit swung above 50 for the first time since February to reach 50.9 from June’s 49.8 reading. The company’s employment index also failed to reach growth territory, landing just below the threshold as its pace of improvement slowed.