The purchasing managers’ index from the Institute for Supply Management dropped to 52.7 from the prior 53.5, which with January, had been the best reading this year. Last August the index has struck a three year peak at 58.1. Economists in the Bloomberg survey had forecast a score of 53.5.
A second guage of manufacturing sentiment from Markit Economics of London was unrevised at 53.8 in July.
Component indexes of the ISM survey were mixed. Production rose to a three months high at 56.0 from 54.0. New orders reached a seven month top at 56.5 from 56.0, though the gain was wholly attributable to seasonal adjustments. The unadjusted orders print of 52.5 was the lowest since December 2013.
Unfilled orders plunged to 42.5 from 47.0 in June and 53.5 in May. It was the smallest backlog in orders since November 2012. Employment fell to 52.7 from 55.5 but is still considerably better than April's gauge of 48.3.That month had been the worst view of companies’ willingness to hire new workers since May 2013. Readings above 50 indicate activity in the category is expanding.
Prices and export orders fell, hammered by the strong dollar which makes imported goods cheaper and U.S. made products more costly overseas. Imports declined to the second lowest level in 30 months, only July 2014 had been lower at 52.0, harmed by lingering caution among U.S. consumers and declining petroleum importation.
Export orders registered 48.0 in July, the second poorest score in two and a half years, worsted only by the March result at 47.5.
Factory inventories slipped to 49.5 in July from 53.0 and customer inventories decreased to 44.0 from 48.5. Retailers may be beginning to allow their current stockpile of goods wind down as sales in many categories of consumer goods remain slow.
Eleven of 18 industries included in the survey saw some type of expansion, led by textile mills and paper products.
The mostly disappoints results of the ISM survey are in agreement with a U.S. economy that has been unable to break out of its slow growth pattern of the past six years.
American gross domestic product grew at a 2.3 percent annual pace in the second quarter that followed an anemic 0.6 percent expansion in the first three months of the year, the Commerce Department reported last week.
This latest report brings GDP growth in the elapsed year before July to 2.3 percent, slightly better than the 2.1 percent economic growth of the last four and a half years. The economic expansion since the end of the recession in June 2009 has been about half the average of post war expansions.
Personal income and spending also improved as expected according to the Bureau of Economic Analysis a division of the Commerce Department.
Personal income rose 0.4 percent in June, 0.1 percent better than the forecast in the Bloomberg survey, but May’s measurement dropped to 0.4 percent from 0.5 percent after revision. The annual gain in family income rose 0.1 percent in June to 3.9 percent.
The 3.1 percent average annual increase in income in the past two and a half years is a bit more than half the 5.8 percent average annual gain during the twenty years from 1985 to the end of 2004.
Personal spending or consumption rose 0.2 percent on the month and 3.6 percent on the year in June. However, real personal spending, the same category corrected for inflation and a more accurate representation of consumer expenditures, was flat following a 0.4 percent gain in May. The 2.9 percent annual expansion in June was the lowest since last July 2014 when it was 2.7 percent.
Since December 2012 real personal consumption has gone up an average of 2.1 percent each year which is about two-thirds of the 3.4 percent annual gain from 2000, when this series began, to the end of 2006.
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