Manufacturing expands in July, but at slower pace

By Annalyn Censky, staff reporter


NEW YORK (CNNMoney.com) -- Manufacturing activity expanded for the 12th consecutive month in July, but at a slower rate than the month before, according to a purchasing managers' index released Monday.

The Institute for Supply Management (ISM) index of U.S. manufacturing dropped to 55.5 in July from 56.2 in June. Any score above 50 indicates growth in the manufacturing sector.

While the report shows growth in the manufacturing industry slowed during the month, July's number is slightly better than analysts expected, showing higher employment, supplier deliveries and prices in the industry.

Economists surveyed by Briefing.com were expecting a reading of 54.2.

"July marks 12 consecutive months of growth in manufacturing, and indications are that demand is still quite strong in 10 of 18 industries," Norbert Ore, chairman of the Tempe, Ariz.-based ISM's Manufacturing Business Survey Committee, said in a statement.

Of the 18 industries surveyed in the report, 10 reported growth. Plastics and rubber products, electrical equipment and appliances were among the industries showing the strongest growth.

Overall, manufacturing growth has slowed for the last three months, with the index dropping about 5 points from the 60.4 reading in April that was the fastest growth rate in six years. The slowdown is consistent with an overall easing in the economic recovery, said Paul Dales, an economist with Capital Economics.

"July's ISM survey provides further evidence of what we have been expecting all along; a fading of the economic recovery in the second half of this year and into next year, but no second recession," he said in a note to investors.

The employment section of the index reported a jump in hiring in the industry, which is an optimistic sign for the economy overall, said Dan Meckstroth, chief economist with the Manufacturers Alliance/MAPI .

Uncertain about the recovery, firms have been reluctant to boost their hiring and, instead, have been increasing hours or productivity in other ways. A boost in manufacturing jobs likely means that firms are confident there will be a lot of new orders in the pipeline, Meckstroth said.

The report brought two other encouraging signs: exports are growing faster than imports, and inventories expanded in July after contracting for the previous three months.

Meckstroth expects to see stronger overall growth in August in the machinery and high-tech sectors, as factories use their extra cash to make selective improvements to their equipment to further increase productivity.

The ISM index reflects the number of people who say economic conditions are better, compared with those who say conditions are worse.

While the index can paint a picture of broad trends, some analysts warn that because it stems from a survey, the index can be subjective.  To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 16,733.87 55.97 0.34%
Nasdaq 4,467.21 14.42 0.32%
S&P 500 1,957.08 6.26 0.32%
Treasuries 2.26 -0.02 -0.70%
Data as of 11:25am ET
Company Price Change % Change
Microsoft Corp 45.61 0.59 1.31%
Ford Motor Co 13.97 -0.43 -2.99%
Apple Inc 104.74 -0.09 -0.09%
Bank of America Corp... 16.62 0.02 0.15%
Yahoo! Inc 43.15 0.55 1.30%
Data as of 11:11am ET

Sections

Wall Street is tired of Amazon losing money. Investors want Jeff Bezos to be more focused and disciplined with the company's long-term investments. More

Regulators are about to reveal the results of an extensive health check of Europe's top 130 banks, indicating which may need a cash infusion. More

Tumblr CEO David Karp says he's still the boss after Yahoo's purchase, and he's happy with the progress the company has made so far. More

Using technology developed for the military and implemented in Iraq, schools have installed alarm systems that detect gunfire. More

Big purchases often come with big expectations. So it's no wonder that in a recent survey 80% of homebuyers said they regretted at least one thing about their home. Here are ways to improve those odds. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.