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U.S. Manufacturing Index Indicates Faster Than Expected Growth In July

ism manufacturing 113018 03aug20 lt

A report released by the Institute for Supply Management on Monday showed a bigger than expected acceleration in the pace of growth in U.S. manufacturing activity in the month of July.

The ISM said its purchasing managers index rose to 54.2 in July from 52.6 in June, with a reading above 50 indicating growth in manufacturing activity. Economists had expected the index to inch up to 53.6.

"In July, manufacturing continued its recovery after the disruption caused by the coronavirus (COVID-19) pandemic," said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

He added, "Panel sentiment was generally optimistic (two positive comments for every one cautious comment), continuing a trend from June."

With the bigger than expected increase, the purchasing managers index reached its highest level of expansion since March of 2019.

The advance by the headline index came as the new orders index jumped to 61.5 in July from 56.4 in June and the production index surged up to 62.1 from 57.3.

The employment index also climbed to 44.3 in July from 42.1 in June, although the reading below 50 still indicated the twelfth consecutive month of employment contraction.

"Only one of the six big industry sectors experienced expansion, as factories were able to achieve significant gains in output with a reduced labor pool," said Fiore.

He added, "Long-term labor market growth remains uncertain, but strong new-order levels and an expanding backlog signify potential strength for the rest of the third quarter."

The report also said the prices index rose to 53.2 in July from 51.3 in June, indicating raw materials prices increased for the second consecutive month.

On Wednesday, the ISM is scheduled to release a separate report on service sector activity in the month of July. The non-manufacturing index is expected to dip to 55.0 in July after spiking to 57.1 in June.

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