Data released on Monday showed the ISM Manufacturing PMI index dropped less than expected in July. According to analysts at Wells Fargo, the headline reading of 52.8 is still consistent with expansion, but the slowest pace of expansion since June 2020 when the economy was still emerging from the COVID lockdowns.
Key Quotes:
“New orders contracted for the second straight month in a sign that the economy is cooling. The employment component was in contraction territory as well. An inventory build helped keep the headline ISM in expansion territory.”
“Manufacturers have been adding to payrolls every month so far this year, including 29K new factory jobs in June. For the better part of the past year difficulty finding labor was often the reason behind any slowing in hiring. These days that is less obviously the main obstacle; manufacturing production posted back-to-back declines in May and June, and while core capital goods orders are still positive, bookings have slowed in recent months.”
“Factory output fell 0.5% in June and revisions bit hard into past data on manufacturing reducing the level of manufacturing output to 2018 levels. Against that deteriorating backdrop, the fact that the ISM production component slipped to 53.5 and the new orders component slipped further into contraction territory at 48.0 does not bode well for this bellwether. The strengthening U.S. dollar presents a headwind as the greenback is inversely related to manufacturing and broader industrial production.”
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