Analysis

ISM: Manufacturing moves deeper into contraction in July

Written by David Schollaert

August 1, 2024

US manufacturing activity contracted for a fourth straight month in July, as reported in the latest release from the Institute for Supply Management (ISM). The Index has indicated contraction in the manufacturing sector for 20 of the last 21 months.

The ISM Manufacturing PMI eased to 46.8% in July, down 1.7 percentage points from June and now marking the lowest reading of the year. A reading above 50 indicates the manufacturing economy is growing, while a reading below 50 indicates contraction.

Despite this, ISM said the overall economy remained in expansion for the 51st month in a row through July. (The institute noted that a Manufacturing PMI above 42.5%, over a period, generally indicates that the overall economy is expanding.)

“Demand remains subdued, as companies show an unwillingness to invest in capital and inventory due to current federal monetary policy and other conditions,” said ISM Chair Timothy R. Fiore. “Production execution was down compared to June, likely adding to revenue declines, putting additional pressure on profitability. Suppliers continue to have capacity, with lead times improving and shortages not as severe.”

Of the 16 manufacturing industries tracked, ISM said five reported growth in July while the remaining 11 contracted. Miscellaneous Manufacturing was identified as a growing industry while Primary Metals and Fabricated Metal Products were reported to be in contraction.

Steel market comments

The report includes comments from survey respondents, one of which was from a fabricated metal products executive expressing the extent of the decline business conditions: “Unfortunately, our business is experiencing the sharpest decline in order levels in a year. We were well below our budget target in June; as a result, it was the first month this year that we had negative net income.”

The full June report is available on the ISM website here.

David Schollaert

David Schollaert is deputy editor-in-chief for Steel Market Update. David joined SMU after more than a decade in the metals and mining industry in a myriad of different roles. Much of his early experience and expertise were within the coverage and analysis of steel-making raw materials and served previously as senior editor of the CRU Prices Service. Most recently, however, before his return to market analysis, David held roles as a metals buyer and an operations manager for raw material suppliers. He can be contacted at david@steelmarketupdate.com or 724-720-1008.

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