The manufacturing ISM has been a broken record for nine months.

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Chart and excerpts below by permission from the Institute for Supply Management ® ISM® 

Economic activity in the manufacturing sector contracted in June for the ninth consecutive month following a 28-month period of growth according to the Institute for Supply Management. And for the second straight month, every ISM^® subcategory is in contraction.

Please consider the July 2023 Manufacturing ISM^® Report On Business^® by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management^® (ISM^®).

“The July Manufacturing PMI® registered 46.4 percent, 0.4 percentage point higher than the 46 percent recorded in June. Regarding the overall economy, this figure indicates an eighth month of contraction after a 30-month period of expansion. The New Orders Index remained in contraction territory at 47.3 percent, 1.7 percentage points higher than the figure of 45.6 percent recorded in June. The Production Index reading of 48.3 percent is a 1.6-percentage point increase compared to June’s figure of 46.7 percent. The Prices Index registered 42.6 percent, up 0.8 percentage point compared to the June figure of 41.8 percent. The Backlog of Orders Index registered 42.8 percent, 4.1 percentage points higher than the June reading of 38.7 percent. The Employment Index dropped further into contraction, registering 44.4 percent, down 3.7 percentage points from June’s reading of 48.1 percent.

“Of the six biggest manufacturing industries, only one — Petroleum & Coal Products — registered growth in July.

“Demand remains weak but marginally better compared to June, production slowed due to lack of work, and suppliers continue to have capacity. There are signs of more employment reduction actions in the near term to better match production output. Ninety-two percent of manufacturing gross domestic product (GDP) contracted in July, up from 71 percent in June. However, the share of manufacturing GDP registering a composite PMI^® calculation at or below 45 percent — a good barometer of overall manufacturing weakness — was 25 percent in July, compared to 44 percent in June, a clear positive,” says Fiore.

Diffusion Index Comments

The ISM is a diffusion index, signaling direction not amount. For example a firm hiring 10 workers and a firm laying off 200 workers balances out.

And there is a survival bias and a weighting bias.

ISM Services

On July 6, I noted ISM Services Rebounds Sharply, Prices Rise 73 Straight Months

Unlike manufacturing, services has been in an out of contraction, but mostly positive, with prices increasing 73 consecutive months.

ISM Services reports on Thursday. The Bloomberg Econoday consensus is for a reading of 53 compared to a reading of 53.9 and a near break even 50.3 in May.

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