Partly reflecting slowdowns in new orders and production growth, the Institute for Supply Management released a report on Wednesday showing growth in U.S. manufacturing activity slowed by more than anticipated in the month of July.
The ISM said its purchasing managers index fell to 58.1 in July after unexpectedly climbing to 60.2 in June. While a reading above 50 still indicates growth in the manufacturing sector, economists had expected the index to show a more modest drop to 59.5.
The bigger than expected decrease by the headline index came as the new orders index slid to 60.2 in July from 63.5 in June and the production index tumbled to 58.5 from 62.3.
Meanwhile, the report said the employment index inched up to 56.5 in July from 56.0 in June, indicating a modest acceleration in the pace of job growth in the manufacturing sector.
Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee, noted production and employment continue to expand in spite of labor and material shortages.
The ISM said the supplier deliveries index dropped to 62.1 in July from 68.2 in June, although a reading above 50 still indicates slower deliveries.
“Demand remains robust, but the nation’s employment resources and supply chains continue to struggle” Fiore said.
He added, “Respondents are again overwhelmingly concerned about how tariff-related activity, including reciprocal tariffs, will continue to affect their business.”
On the inflation front, the prices index fell to 73.2 in July from 76.8 in June, suggesting a slowdown in the pace of price growth.
The ISM is scheduled to release a separate report on activity in the service sector in the month of July on Friday. The index of activity in the sector is expected to edge down to 59.0 in July from 59.1 in June.