The pace of growth in the manufacturing sector continued to show signs of a slowdown in July as the ISM Manufacturing Index came in at a level of 51.2 versus expectations for a reading of 52.0.  The last time we saw readings this weak in the ISM Manufacturing Index was nearly three years ago back in August 2016.  Not only did this month’s reading come in below expectations, but it was also the fourth straight monthly decline which is the longest such streak since the eight-month stretch ending in January 2016.  Talk about a rut!

As you might expect given the ISM Manufacturing Index’s move towards 50 (the dividing line between growth and contraction), the commentary from respondents in this month’s report is sounding increasingly cautious.  The frequency of terms like weakness, slowdown, and other terms like these have been on the rise in recent months.

In looking at the breadth of the ISM Manufacturing Index’s sub-indices, things were biased towards the downside as six components saw m/m declines and just four saw increases.  On a y/y basis, things were even worse as Customer Inventories was the only one higher versus a year ago.  Just as the headline index saw its lowest reading since August 2016, a number of the sub-indices are also at their weakest levels since 2016.  Both Production and Imports haven’t been this weak since August 2016, Prices Paid and Export Orders haven’t been this weak since February 2016, and Backlog Orders dropped to its lowest level since January 2016.  In order to not close on a down note, we would note that New Orders managed to show a slight increase rising from 50.0 to 50.8. Start a two-week free trial to Bespoke Premium to receive our best equity research on a daily basis.

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