The Institute for Supply Management (ISM) revealed on Thursday that U.S. manufacturing activity contracted more sharply than anticipated in July.
According to the ISM's latest report, the manufacturing Purchasing Managers' Index (PMI) decreased to 46.8 in July, down from 48.5 in June. A reading below 50 signifies contraction. Economists had predicted a slight rise to 48.8 percent.
This unexpected dip brings the manufacturing PMI to its lowest point since November 2023, when it stood at 46.6.
The headline index's decline can be attributed to the new orders index dropping to 47.4 in July from 49.3 in June, and the production index falling to 45.9 from 48.5.
"Demand remains subdued as companies are hesitant to invest in capital and inventory due to prevailing federal monetary policy and other conditions," commented Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.
He further noted, "Production execution declined compared to June, potentially exacerbating revenue drops and increasing pressure on profitability."
The report also highlighted a significant fall in the employment index, which plummeted to 43.4 in July from 49.3 in June, indicating a faster contraction in manufacturing sector employment.
Conversely, the prices index saw a slight increase, ticking up to 52.9 in July from 52.1 in June, suggesting a modest acceleration in price growth.
The ISM plans to release another report on Monday regarding the service sector's activity in July. The services PMI is projected to rise to 51.0 in July from 48.8 in June, with a reading above 50 signifying growth.
