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Supply Chain News: US Purchasing Managers Index Falls but Stays Strong for July, ISM Says


Most Measures Indicate Strong Economy

Aug. 2, 2021
SCDigest Editorial Staff

The US Purchasing Managers Index (PMI) for July fell 2.4 percentage points compared to the June, but even so with the score of 59.5 it means the index from the Institute for Supply Management (ISM) is still well above the 50 mark that separates US manufacturing expansion from contraction.

Supply Chain Digest Says...

Seventeen of 18 manufacturing industries ISM tracks reported growth in July. The only industry reporting a decrease in July compared to June was Textile Mills.

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It also means there has expansion in the overall economy for the 14th month in a row after the contraction in April 2020.

A chart of the ISM PMI index for the last 12 months is shown below, and as can be seen the measure has been well over 50 for each of those months.

The New Orders Index also dropped in July, falling a small 1.1 percentage points to a still robust 64.9, in good news for future US manufacturing activity.

Supply chain inflation remains a big issue. The Prices Paid Index was 85.7, down 6.4 percentage points compared to the June figure of an almost unheard of 92.

Still, that mean that in July 85.7% of companies saw on average rising prices for commodities, components and other inputs.

Timothy Fiore, chair of ISM, commented that “Business Survey Committee panelists reported that their companies and suppliers continue to struggle to meet increasing demand levels. As we enter the third quarter, all segments of the manufacturing economy are impacted by near record-long raw-material lead times, continued shortages of critical basic materials, rising commodities prices and difficulties in transporting products.”

Other key data points from the July report from ISM include:

The Production Index registered 58.4, a decrease of 2.4 percentage points compared to the June reading of 60.8



Data Source: ISM

(Article Continues Below)



• The Backlog of Orders Index registered 65, 0.5 percentage point higher than the June reading of 64.5

• The Employment Index registered 52.9, 3 percentage points higher compared to the June reading of 49.9.

• The Supplier Deliveries Index registered 72.5, down 2.6 percentage points from the June figure of 75.1, meaning most companies are seeing longer supplier lead time.

• The Inventories Index registered 48.9, 2.2 percentage points lower than the June reading of 51.1, meaning companies are keeping inventories flat

• The New Export Orders Index registered 55.7, a decrease of 0.5 percentage point compared to the June reading of 56.2

• The Imports Index registered 53.7. a 7.3-percentage point decrease from the June reading of 61

Seventeen of 18 manufacturing industries ISM tracks reported growth in July. The only industry reporting a decrease in July compared to June was Textile Mills.

Comments from those taking the monthly survey include:

“Still dealing with price increases from force majeure issues as well as overseas shipping premiums and higher costs of items like fuel. Customer demand still high; pushing plant to max production rates.” [Food, Beverage & Tobacco Products company]

“Sales are above last year by a good percentage, but meeting demand is just not possible due to force majeure situations, logistics, and labor shortages. We don’t anticipate this ending until well into 2022.” [Nonmetallic Mineral Products company]

What are your thoughts on this ISM data for July? Let us know your thoughts at the Feedback section below.


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