U.S. Factory Growth Held Solid Momentum in July, But Shortages Persist -- ISM
By Xavier Fontdegloria
Manufacturing activity in the U.S. remained robust in July, but
slowed somewhat compared with previous months as supply-chain
strains continued to act as a meaningful drag on growth.
The ISM Manufacturing Report on Business PMI fell to 59.5 in
July from 60.6 in June, according to data from a survey compiled by
the Institute for Supply Management released Monday. Economists
polled by The Wall Street Journal expected the index to come in at
July's data suggest that the country's factory activity expanded
at a solid clip, with four of the five subindexes that form the
headline PMI above the 50-point threshold that indicates
Respondents reported that their companies and suppliers continue
to struggle to meet increasing demand levels, said Timothy Fiore,
chair of the ISM Manufacturing Business Survey Committee.
"As we enter the third quarter, all segments of the
manufacturing economy are impacted by near record-long raw-material
lead times, continued shortages of critical basic materials, rising
commodities prices and difficulties in transporting products," he
Manufacturers have been dealing with these materials shortages
for months and could still take time to be fully resolved,
Demand remained strong in July. The new orders index eased
somewhat to 64.9 from 66.0 the previous month, the customers'
inventories index edged lower to 25.0 and the backlog of orders
increased to a very high 64.5.
The production index cooled to 58.4 from 60.8 in June. The
employment index swung to expansion territory, to 52.9 from 49.9
the previous month, signaling payroll growth.
Firms continued to experience difficulties to attract and retain
labor, but there were signs of improvement compared with previous
months, the report said.
However, worker absenteeism and difficulties in filling open
positions continue to be issues limiting the sector's growth
potential, it said.
Supply-chain related problems were widespread in July, but some
of data showed signs of easing compared with June. The supplier
delivery index softened to 72.5 from 75.1.
The inventories index, however, fell to contraction territory to
Cost pressures remained high, but cooled somewhat. The prices
index edged down to 85.7 from 92.1 the previous month. "Supply and
demand dynamics appear to be moving closer to equilibrium for the
first time in many months," Mr. Fiore said.
Comments from respondents indicate slight improvements in labor
and supplier deliveries offset by continued problems in the
"Sales are above last year by a good percentage, but meeting
demand is just not possible due to force majeure situations,
logistics, and labor shortages," a respondent from nonmetallic
mineral products sector said. "We don't anticipate this ending
until well into 2022."
Write to Xavier Fontdegloria at firstname.lastname@example.org
(END) Dow Jones Newswires
August 02, 2021 10:42 ET (14:42 GMT)
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