By Maria Martinez

Economic activity in the U.S. manufacturing sector continued its recovery in July, data from a survey compiled by the Institute for Supply Management showed Monday.

The ISM Manufacturing Report on Business PMI for July stood at 54.2%, up 1.6 percentage points from the June reading of 52.6%.

This figure indicates expansion in the overall economy for the third month in a row after a contraction in April, which ended a period of 131 consecutive months of growth, ISM said.

The figure is higher than expectations from economists polled by The Wall Street Journal, who predicted the PMI to be at 53.8%.

"The growth cycle continues for the second straight month after three prior months of Covid-19 disruptions," said Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee.

ISM compiles the PMI from a survey of manufacturing supply executives whose responses reflect the change, if any, in the current month compared to the previous one in certain areas of business activity. A PMI reading above 50% indicates that the manufacturing economy is generally expanding, while below 50% indicates that it is generally declining.

The production index jumped to 62.1%, up 4.8 percentage points compared with the June reading of 57.3%. The new orders index climbed to 61.5% from June's 56.4%.

The prices index registered 53.2%, up 1.9 percentage points from the June level of 51.3%, suggesting prices are increasing. The inventories index went down to 47.0%.

Despite a 2.2 percentage points increase to 44.3%, the employment index remained in contraction territory.

Of the 18 manufacturing industries, 13 reported growth in July and three reported contractions in activity.

"We are still seeing our customers shut down or effected by Cvodi-19. We are hoping for a bounce back in September," said one respondent from the manufacturing sector.

Write to Maria Martinez at maria.martinez@wsj.com

(END) Dow Jones Newswires

August 03, 2020 10:47 ET (14:47 GMT)

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