ISM Manufacturing Index (PMI) Indicates Soft Growth in July

The Institute for Supply Management (ISM) Manufacturing Index (PMI) came in at 51.2 in July, indicating factory activity growth at a soft pace. The consensus forecast was looking for a reading of 51.9.

“Comments from the panel reflect continued expanding business strength, but at soft levels; June was the third straight month with slowing PMI expansion,” Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

“Demand expansion ended, with the New Orders Index recording zero expansion, the Customers’ Inventories Index remaining at a too-low level, and the Backlog of Orders Index contracting for the second straight month.”

Panel Responses

• “China tariffs and pending Mexico tariffs are wreaking havoc with supply chains and costs. The situation is crazy, driving a huge amount of work [and] costs, as well as potential supply disruptions.” (Computer & Electronic Products)
• “Tariffs are causing an increase in cost of goods, meaning U.S. consumers are paying more for products.” (Chemical Products)
• “Demand for the remainder of 2019 has softened significantly, due to issues in the aerospace industry. The 2020 outlook is looking stronger. Overall, state and local economies remain strong. Recruiting for open positions still requires time to find the right candidates.” (Transportation Equipment)
• “Global demand remains very strong. [We] shifted shipments to China from our U.S. plants to our Canadian and European plants because of tariffs.” (Food, Beverage & Tobacco Products)
• “Tariffs continue to be a challenge. We are concerned about the implementation of Mexican tariffs and the cost pressures it will have on our Latin American business.” (Petroleum & Coal Products)
• “Tariffs continue to adversely impact decisions and forecasting. Our increasing fear is that current trends will weaken the global economy, influencing our ability to grow in 2020 and beyond.” (Fabricated Metal Products)
• “A late planting season has caused a slowdown in our agricultural business. Seeing higher prices due to tariffs and tariff-related supply chain issues.” (Machinery)
• “Business is still strong. Pricing on raw materials has stabilized.” (Plastics & Rubber Products)
• “Business has slowed in the last 30 to 60 days. The last 30 days have tracked 4 percent below plan, but still 6 to 8 percent above the previous year to date.” (Miscellaneous Manufacturing)
• “Weather in various markets across the country has improved month over month, which has positively affected our daily output. If the trend continues, we will have to replenish [at] an increased month-over-month rate.” (Wood Products)