The overall economy grew for the thirty-eighth straight time, while the manufacturing sector contracted for the second consecutive month, the Institute for Supply Management reported Wednesday.

According to the ISM's monthly report on business, the ISM index crept to 49.8 in July from 49.7 in June.

Economists polled by Thomson Reuters predicted the index would rebound to 50.2.

An index reading below 50 signals a slowing economy, while a level above 50 suggests expansion. A reading of 50 shows the sector was unchanged in the month.

"The PMI registered 49.8 percent, an increase of 0.1 percentage point from June's reading of 49.7 percent, indicating contraction in the manufacturing sector for the second consecutive month, following 34 consecutive months of expansion," said Bradley Holcomb, chair of the Institute of Supply Management's manufacturing business survey committee. "The New Orders Index registered 48 percent, an increase of 0.2 percentage point from June and indicating contraction in new orders for the second consecutive month, but at a slightly slower rate. Both the Production Index and the Employment Index remained in growth territory, registering 51.3 percent and 52 percent, respectively. The Prices Index for raw materials registered 39.5 percent, an increase of 2.5 percentage points from the June reading of 37 percent, indicating lower prices on average for the third consecutive month. A growing number of comments from the panel this month reflect a slowdown in their businesses and general concern over increasing economic uncertainty."

The closely watched prices paid index climbed to 39.5 from 37.0. The employment index was at 52.0, down from 56.6 the prior month.

The production index increased to 51.3 from 51.0, the new orders index grew to 48.0 from 47.8; the supplier deliveries index slipped to 48.7 from 48.9; the export orders index declined to 46.5 from 47.5; and the imports index fell to 50.5 from 53.5.

The inventories index rose to 49.0 from 44.0; the customers' inventories index rose to 49.5 from 48.5; and backlog of orders dropped to 43.0 from 44.5.

Respondents' comments included:

"Business has been up for the last seven consecutive months - strong customer orders coming in." (Machinery)

"Automotive demand remains strong." (Fabricated Metal Products)

"Resin pricing has bottomed out so customer orders have increased; it was pent-up demand." (Plastics & Rubber Products)

"We have noticed a marked slowing in business overall. [We] have confirmed this with other companies in our industry as well." (Wood Products)

"Forecasts remain high, but actual bookings remain flat." (Computer & Electronic Products)

"Taking a conservative approach to spending including hiring, travel and inventory. U.S. economy seems stuck - at best - with little to no growth." (Apparel, Leather & Allied Products)

"Business remains surprisingly strong." (Primary Metals)

"Continued slowdown in government military sector spending in advance of the presidential elections has seriously impacted business performance." (Transportation Equipment)

"Business is softening, requiring some down production days." (Furniture & Related Products)

"General state of business this month is flat, with increasing economic uncertainty." (Chemical Products)


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