ISM Manufacturing PMI — July 2024
Headline: The ISM Manufacturing PMI fell to 46.8 from 48.5, indicating manufacturing contracted at a faster rate for a fourth consecutive month. The reading was a six-month low, below the prior six-month range of 47.8–50.3 and the 48.9 six-month average. Manufacturing remained below its 50.0 breakeven, while the broader economy was still growing above its 42.5 breakeven.
Sub-indices:
| Index | Level | Prior | Change | Direction | vs 6-mo |
|---|---|---|---|---|---|
| New Orders | 47.4 | 49.3 | -1.9 | Contracting | below avg (49.5) |
| Production | 45.9 | 48.5 | -2.6 | Contracting | 6-mo low |
| Employment | 43.4 | 49.3 | -5.9 | Contracting | 6-mo low |
| Supplier Deliveries | 52.6 | 49.8 | +2.8 | Slowing | 6-mo high |
| Inventories | 44.5 | 45.4 | -0.9 | Contracting | 6-mo low |
| Customers' Inventories | 45.8 | 47.4 | -1.6 | Too Low | below avg (46.2) |
| Prices | 52.9 | 52.1 | +0.8 | Increasing | below avg (55.2) |
| Backlog of Orders | 41.7 | 41.7 | 0.0 | Contracting | below avg (44.5) |
| New Export Orders | 49.0 | 48.8 | +0.2 | Contracting | below avg (49.4) |
| Imports | 48.6 | 48.5 | +0.1 | Contracting | below avg (51.3) |
Key moves:
- Employment fell 5.9 points to 43.4, a six-month low and the sharpest deterioration among the major sub-indices.
- Production declined to 45.9, also a six-month low, while New Orders fell to 47.4, below their six-month average.
- Supplier Deliveries rose above 50 to 52.6, a six-month high, indicating slower deliveries; Inventories fell to a six-month low of 44.5.
Insights:
- The demand-production complex weakened materially: New Orders, Production and Backlog all remained below 50, with Backlog at 41.7 for a 22nd consecutive month. The flat but deeply contracting backlog points to limited forward support for production.
- The decline in manufacturers’ Inventories to 44.5, alongside contracting New Orders, is more consistent with continued destocking amid weak demand than deliberate stocking for future growth. However, customers’ inventories were “too low” at 45.8, a contrarian signal that could support replenishment demand if orders stabilize.
- Supplier Deliveries crossed above 50 from 49.8. The slower delivery pace is typically demand-positive or indicative of supply constraints, but it did not offset the broader contraction in orders and production.
- Employment remained firmly contractionary at 43.4 despite the prior month’s near-50 reading, confirming net manufacturing job shedding rather than merely slower hiring. New Export Orders and Imports improved marginally but remained below 50, offering little evidence of external or supply-chain momentum.
- Prices increased faster to 52.9, but remained below the six-month average of 55.2. Input-cost pressure is therefore present but more moderate than earlier in the year, implying some margin and goods-inflation risk without a renewed price surge.
Breadth & prices: Five industries reported growth—Printing, Petroleum & Coal Products, Miscellaneous Manufacturing, Furniture, and Nonmetallic Mineral Products—and none were listed as contracting. Input prices increased, with the Prices Index at 52.9.
Takeaway: July’s six-month-low headline, weaker orders and production, sharp employment deterioration, and depressed backlog point to a manufacturing cycle still losing momentum. Low customer inventories and slower supplier deliveries provide potential offsets, but the near-term macro signal remains contractionary, with only moderate input-cost pressure.