US manufacturing contracts sharply in July

WASHINGTON: US manufacturing activity contracted more sharply than expected last month, according to industry survey data published on Thursday, deepening a recent slump on continued weak demand and falling output.

The Institute for Supply Management’s (ISM) manufacturing index was 46.8 per cent in July, down 1.7 percentage points from a month earlier.This was well below market expectations of 48 per cent, according to Briefing.com, and marked the fourth consecutive month where the reading was below the 50-point mark separating expansion from contraction.

“This is a very downbeat report underlining that the manufacturing sector continues to struggle,” Pantheon Macroeconomics senior US economist Oliver Allen wrote in a note to clients.The news that the US manufacturing contraction has deepened will likely bolster the case made by Federal Reserve Chair Jerome Powell on Wednesday that the US central bank could make its first interest rate cut “as soon as” September.

“US manufacturing activity entered deeper into contraction,” ISM survey chief Timothy Fiore said in a statement. “Demand was weak again, output declined and inputs stayed generally accommodative.”

Demand was subdued, he explained, “as companies show an unwillingness to invest in capital and inventory due to current federal monetary policy and other conditions.”

Only five manufacturing industries reported growth last month -- including petroleum and coal products, and furniture -- down from eight a month earlier, while 11 industries contracted, the ISM said.

“It has been gloomy for two years in the manufacturing sector, but today’s ISM report shows that various measures of activity have sunk to levels not seen since the initial arrival of the pandemic,” Well Fargo economists wrote in an investor note on Thursday.