The US manufacturing sector continued to grow in July, according to an industry survey released on Monday, but the pace has been hampered by slowing demand, while price increases have slowed dramatically.
And amid a tight US job market, hiring slowed for the third straight month, but companies are reporting fewer problems filling vacancies and no signs of layoffs, the latest report from the Institute for Supply Management showed.
However, companies continue to struggle to fill orders due to continued problems in sourcing materials.
The ISM manufacturing index fell to 52.8 percent, just two-tenths lower from the previous month but the lowest level since June 2020 during the pandemic downturn.
However, this level was still above the 50 percent mark, which indicates expansion for the 26th straight month.
“The US manufacturing sector continues to expand — albeit slightly less in July — as new order rates continue to fall, supplier deliveries improve and prices fall to acceptable levels,” said Timothy Fiore, chair of the ISM Manufacturing Survey.
The new orders index fell 1.2 points to 48 percent, signaling a slowdown, and production fell a little more but is still growing.
“Delivery times remain at elevated levels and fundamental commodity prices continue to convince buyers to stay on the sidelines,” Fiore said
The price index fell a whopping 18.5 points – the fourth-biggest drop on record – to 60 percent, with a much higher proportion of companies reporting falling prices, the survey showed. The index has been above 60 percent for almost two years.
The Covid-19 lockdowns in China and Russia’s war in Ukraine have exacerbated the tightening experienced, fueling global inflationary spurts, particularly in the energy sector, and prompting the Federal Reserve to aggressively raise borrowing costs.
Respondents pointed to ongoing supply problems and the impact of rising prices, and several expressed concerns about the future
“Our markets are still holding up, but I believe a slowdown is coming,” said one. “I think the overall market is at the beginning of a recession.”
Oxford Economics’ Oren Klachkin said the challenges facing businesses are increasing.
“Manufacturers will face many of the same challenges in the second half of 2022 as they did in the first half,” he said in an analysis.
“The confluence of hot inflation, higher interest rates, ongoing supply chain issues and normalizing spending patterns will make demand more vulnerable.”
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