Monday, August 2, 2010

ISM Manufacturing Index Falls 0.7 Points to 55.5; New Orders Down but Employment Up

In July, the Institute for Supply Management's Manufacturing Index fell back for a third straight month, declining 0.7 points to 55.5. Despite the drop, the index remains well above the expansionary threshold of 50. However, this is the lowest level since last December. Manufacturing activity is continuing to expand; however, it is becoming evident that the recovery in this sector is decelerating. If the index continues on this trajectory in future months, it would be a cause for concern about the broader economic recovery.

The production component fell 4.4 points to 57.0. As a forward looking indicator of future production, the new orders component fell heavily for a second straight month. It declined by 5.0 points to 53.5, the lowest level since June 2009. In contrast, the employment component rebounded after June’s decline, increasing by 0.8 point to 58.6.

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