U.S. manufacturing activity expands more than forecast in July - ISM

A report from the Institute for Supply Management (ISM) showed on Monday the U.S. manufacturing sector’s activity expanded in July.

The ISM's index of manufacturing activity came in at 54.2 percent last month, up 1.6 percentage points from the June reading of 52.6 percent. The reading pointed to the biggest expansion in factory activity since March 2019.

Economists' had forecast the indicator to increase to 53.6 percent.

A reading above 50 percent indicates expansion, while a reading below 50 percent indicates contraction.

According to the report, the New Orders Index stood at 61.5 percent, an increase of 5.1 percentage points from the June reading, while the Production Index registered 62.1 percent, up 4.8 percentage points compared to the June reading, the Backlog of Orders Index posted 51.8 percent, an advance of 6.5 percentage points compared to the June reading, and the Employment Index came in at 44.3 percent, an increase of 2.2 percentage points from the June reading. Meanwhile, the Supplier Deliveries Index registered 55.8 percent, down 1.1 percentage points from the June figure.

Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee, noted that growth cycle continued for the second straight month after three prior months of COVID-19 disruptions, with demand and consumption driving expansion. “Among the six biggest industry sectors, Food, Beverage & Tobacco Products remains the best-performing industry sector, with Chemical Products, Computer & Electronic Products and Petroleum & Coal Products growing respectably. Transportation Equipment and Fabricated Metal Products continue to contract, but at soft levels,” says Fiore,” said Fiore. He also added that the past relationship between the PMI and the overall economy indicates that the PMI for July (54.2 percent) corresponds to a 3.3-percent increase in real gross domestic product (GDP) on an annualized basis.