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U.S. Manufacturing Expanded In July

Economic activity in the manufacturing sector expanded in July, and the overall economy grew for the 111th consecutive…

  • August 30, 2018

Economic activity in the manufacturing sector expanded in July, and the overall economy grew for the 111th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.

However, activity is not growing as fast as it was going into the summer.

The July Purchasing Managers Index (PMI) registered 58.1 percent, a decrease of 2.1 percentage points from the June reading of 60.2 percent.

Timothy R. Fiore, Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee, said “Comments from the panel reflect continued expanding business strength. Demand remains strong, with the New Orders Index at 60 percent or above for the 15th straight month, and the Customers’ Inventories Index remaining low.”

The Backlog of Orders Index continued to expand, but at lower levels. Production and employment continues to expand in spite of labor and material shortages.

Here’s What Managers in Different Industries Are Saying:

  • “Global demand is still strong. Working on contingency plans for the Chinese tariffs. We will probably onshore most of that material. Labor availability is becoming an issue.” (Computer & Electronic Products)
  • “As a result of new tariffs on materials to/from China, we are taking measures to move impacted materials ahead of effective dates, which in some cases is resulting in holding higher inventories.” (Chemical Products)
  • “Steel cost increases are causing a lot of negotiations. The increases are real and will affect costs beginning in the third quarter of 2018.” (Electrical Equipment, Appliances & Components)
  • “Reviewing the business case for importing manufactured parts from China, as new tariffs will lead to increased costs that we will pass along to our domestic customers.” (Transportation Equipment)
  • “Corn and soybean meal costs are reducing. Labor continues to be a struggle to fill open positions.” (Food, Beverage & Tobacco Products)
  • “The steel tariffs are a concern to us. We have already seen steel prices increase due to the threat of the tariffs and are seeing kickback from our customers due to the higher prices. We are concerned that the end customer will go to off shore to purchase the finished product.” (Fabricated Metal Products)
  • “Business is moving along at a brisk pace, outperforming the annual plan year-to-date (calendar year financials). However, internationally, nationally and locally, we are finding many manufacturers behind schedule due to capacity constraints. They are stating their order intake is heavy and/or they cannot find qualified employees to get all the work done.” (Machinery)
  • “Tariffs are [resulting in] customs inspection-time increases on imported raw materials from China. Logistics seems to be improving, but we are seeing a [continuing] tight chemical bulk tanker market.” (Plastics & Rubber Products)
  • “Our customer demand is high, but supply of aluminum is tight. Also, tariffs are negatively affecting our bottom line, as we are unable to pass increases to all of our customers. Plus, we are seeing increases in our construction costs because of the steel price increases. Labor market is extremely tight for professional personnel, plant technicians and support associates.” (Primary Metals)
  • “The so-called trade war is now taking its toll on business activity, resulting in substantial reductions to new export orders. China has all but stopped taking orders, causing inventories to build up in the U.S. Domestic business is steady. However, it is too small to carry the load that export markets have retreated from. As a result, we will be meeting as a corporation next week to recast our second-half sales and revenue projections.” (Wood Products)

This gives you an idea of what manufacturers rally think about the economy. As you can see, things are still going strong, but trade disputes are beginning to take a bite.

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