Last updateThu, 22 Oct 2020 5pm

ISM: Manufacturing Expands to Highest Level in Over a Year

Manufacturing grew in July, as the PMI registered 54.2%, 1.6% higher than the June reading of 52.6%. “The PMI signaled a continued rebuilding of economic activity in July and reached its highest level of expansion since March 2019, when the index registered 54.6%. Four of the big six industry sectors expanded. The New Orders and Production indexes returned to strong expansion levels. The Supplier Deliveries Index remained at a more normal level of tension between supply and demand. Seven of the 10 subindexes registered expansion, up from five in June,” says Timothy R. Fiore, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee.

U.S. Economy Shrinks by Record 32.9%

U.S. GDP decreased at an annual rate of 32.9% in the second quarter of 2020, according to the U.S. Department of Commerce. In the first quarter, real GDP decreased 5.0%. The decline in second quarter GDP reflected the response to COVID-19, as "stay-at-home" orders issued in March and April were partially lifted in some areas of the country in May and June, and government pandemic assistance payments were distributed to households and businesses. This led to rapid shifts in activity, as businesses and schools continued remote work and consumers and businesses canceled, restricted, or redirected their spending. The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the second quarter of 2020 because the impacts are generally embedded in source data and cannot be separately identified.

Orders for Durable Goods in U.S. Increased Last Month

New orders for manufactured durable goods in June increased $14.0 billion or 7.3% to $206.9 billion, the U.S. Department of Commerce announced. This increase, up two consecutive months, followed a 15.1% May increase. Excluding transportation, new orders increased 3.3%. Excluding defense, new orders increased 9.2%.

Due to recent events surrounding COVID-19, many businesses are operating on a limited capacity or have ceased operations completely.

Texas Manufacturing Recovery Continues

Texas factory activity continued to expand in July following a record contraction in the spring, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, inched up from 13.6 to 16.1, suggesting a slight pickup in the pace of output growth. Perceptions of broader business conditions were mixed in July.

Other measures of manufacturing activity also pointed to slightly accelerating growth this month. The new orders index advanced four points to 6.9. The growth rate of orders index turned positive in July, coming in at 1.3, after spending four months in negative territory. The capacity utilization and shipments indexes pushed up to 14.0 and 17.3, respectively, their highest readings in nearly a year.

IHS Markit: U.S. Manufacturing Expanded in July

Manufacturers signaled the first improvement in operating conditions since February in July, as the IHS Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) posted above the 50.0 neutral mark at 51.3, up from 49.8 in June.

Overall growth was driven by the first upturns in both output and new orders for five months. Firms noted that the rise in production was due to greater new business inflows. Some companies also stated that higher new orders stemmed from the gradual return of customers and stronger underlying demand. Workforce numbers in the manufacturing sector were broadly unchanged in July, as the rate of backlog depletion eased further.

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