Manufacturing activity climbs slowly in July

Don Hogsett, August 12, 2002

U.S. manufacturing activity was still on the upswing in July, climbing for a sixth straight month, but is now moving ahead at a far more subdued pace, according to the latest monthly gauge of the nation's purchasing managers.

At a reading of 50.5 percent, the Institute of Supply Management's (ISM) monthly report on business points to a manufacturing economy that's still showing signs of growth. But the pace of growth is cooling off rapidly, and the monthly index is down about 10.1 percent from a much stronger reading of 56.2 the month before. A reading above 50 indicates growth in the manufacturing sector, while a number beneath 50 points to contraction. The seasonally adjusted index compiles responses of purchasing executives at more than 400 industrial companies from a broad cross-section of American industry.

In good news for textiles, the sector was one of 12 industries, out of 20 canvassed, reporting continued signs of growth during July. As it had been in May and June, textiles was one of the strongest industrial sectors reporting improvement in July.

"For manufacturing, July was only slightly better than June," said Norbert Ore, head of the ISM's business survey committee. The overall index was lower, he said, "but still indicated growth, as 12 industries reported improvement in July." The slowdown in growth from earlier levels, he noted, "was primarily driven by a weak showing in July's new orders, which may be due to a pause in inventory replenishment."

Putting a big damper on the overall index during July was slower growth in the New Orders Index, which has now racked up gains for eight straight months. While still growing, the pace subsided sharply, to a new reading of 50.4, down from 60.8 in June. Bucking the trend, though, and posting a strong set of numbers was the U.S. textiles industry.

Another sore spot was the Order Backlog Index, which declined after five straight months of growth to a July reading of 45.5, down from 53.5 in June. Textiles, once again, was near the top of the list in growth.

Production, while still gaining, slowed down somewhat, to a reading of 55.7 from 61.4 in June. Textiles, again, was near the head of the list of industries making strides.

U.S. industry was still boosting its exports abroad, with a current reading of 52.2 slipping only slightly from the June index reading of 54.5 and marking a seventh straight month of growth. Again, textiles was one of the strongest sectors reporting continued growth in exports.

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