Manufacturing Expansion Slows in July

Tempe, AZ, August 1, 2007--Economic activity in the manufacturing sector expanded in July for the sixth consecutive month, while the overall economy grew for the 69th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

Manufacturing growth slowed in July as the PMI registered 53.8 percent, a decrease of 2.2 percentage points when compared to June's reading of 56 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI in excess of 41.9 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates that both the overall economy and the manufacturing sector are growing. "The past relationship between the PMI and the overall economy indicates that the PMI average for January through July (53.1 percent) corresponds to a 3.5 percent increase in real gross domestic product (GDP) annually. In addition, if the PMI for July (53.8 percent) is annualized, it corresponds to a 3.7 percent increase in real GDP annually."

The report was issued today by Norbert J. Ore, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "Following a strong second quarter, the manufacturing sector moderated somewhat this past month. In July, manufacturing expanded at its slowest pace in the last four months, but continuing strength in New Orders and Production indicate that third quarter performance should still be quite good. Upward pricing pressures now in their seventh month continue to be a major concern for supply managers."

Top Performing Industries

The 10 industries reporting growth in July — listed in order — are: Wood Products; Furniture & Related Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Paper Products; Textile Mills; Chemical Products; Computer & Electronic Products; Nonmetallic Mineral Products; and Primary Metals.

What Respondents are Saying...

"Price of nickel has finally started the decline to possible normal ranges." (Chemical Products)

"Shortages of electronic components in the military market severely impacting customer deliveries." (Computer & Electronic Products)

"Profit margins shrinking as a result of energy, labor and commodity price increases." (Food, Beverage & Tobacco Products)

"Market going to trough at the moment, but it appears to be near the end." (Transportation Equipment)

"Oil still driving petrochemical prices up." (Plastics & Rubber Products)