Manufacturing Contracted For Second Month in July

The ISM manufacturing index remained in contractionary territory for the second consecutive month despite recovering slightly from June’s reading. July’s ISM manufacturing reading recovered 0.2 points to 49.8, remaining below the neutral threshold of 50. In June the index plunged 3.8 points to 49.7, the third largest decline since the recovery began. This drop is particularly concerning as the larger two drops were closely followed by a jump that offset them.

The details of July’s report were not encouraging, as the primary increase came from a buildup of inventories, which rose from a reading of 44.0 to 49.0. The forward looking new orders measure improved, but only slightly, reaching 48.0. The employment index deteriorated significantly falling 4.4 points to 52.0.

The difference between new orders and inventories, often seen as a proxy for future production fell from 3.8 to -1.0 in July, the first time this measure has been negative since September 2011.

Read the ISM's release.