The latest monthly Manufacturing ISM Report On Business from the Institute for Supply Management (ISM) reports the following are the 10 industries that reported growth in July (listed in order): wood products; furniture and related products; food, beverage and tobacco products; miscellaneous manufacturing; paper products; textile mills; chemical products; computer and electronic products; nonmetallic mineral products; and primary metals.

New orders declined 2.8 percent between June and July, from 60.3 to 57.5. Similarly, the backlog of orders dropped 1.5 percent lower from June, from 53.5 to July's 52.0. As might also be expected, inventories in June measured 45.3 compared with 48.5 in July — "the 12th consecutive month of inventory liquidation," Also, customers' inventories rose 5 percent, from June's 47 to the July's 51.

These signs of slowing may relate to the 7.3 percent production dip, from June's 62.9 to July's 55.6. Nonetheless, July was the sixth consecutive month of production growth for manufacturers.

The price index dropped from 68 in June to 65 in July, indicating manufacturers are paying higher prices on average when compared to June. While 38 percent of respondents reported paying higher prices and 8 percent reported paying lower prices, 54 percent of supply executives reported paying the same prices as the preceding month.

Prices for raw materials remain high in manufacturers' minds, and ISM reports the following commodity prices that rose: caustic soda, copper-based products, low-density polyethylene, soybean oil, stainless steel and wheat.

The between-month commodities whose prices declined included gasoline, natural gas, nickel and flat-rolled steel, according to ISM.

During July, imports of materials by manufacturers grew, albeit slightly, for the 67th consecutive month of growth in import orders. Similar, new export orders registered an increase of 0.5 percentage point over June. This is the 56th consecutive month of growth in export orders.

As many economy watchers already know, export activity depends largely on currency exchange rates. The administration continues to try to keep the dollar low so foreign importers will find good value in American products. Also playing a role in how much U.S. manufacturers are able to export is almost continuous squabbling over tariffs and occasional shifting among tariffs. Many industrialized nations favor tariff reductions, but it seems some countries, the U.S. included, protect certain sectors of the economy. France and agriculture come to mind, as does the U.S. with sugar and cotton.

Supplier deliveries slid to 52 percent from 49.7 percent; a reading above 50 percent indicates slower deliveries. Road construction and increased traffic congestion, in all modes, due to additional families traveling for vacation may have played a part.

The ISM report states that economic activity in the manufacturing sector expanded in July for the sixth consecutive month, while the overall economy grew for the 69th consecutive month."

The strength in the economy is coming from the export side and from a modest improvement in capital spending by U.S. businesses, Global Insight's Nigel Gault recently told MarketWatch. On the other hand, consumer spending will grow slower than incomes for the next few years, he said.

MarketWatch recently awarded Global Insight's "army of economists" the publication's Forecaster of the Month honor because the team, led by Gault and U.S. economist Brian Bethune, "had the most accurate forecasts on 10 major U.S. economic indicators released in June."

"Overall, the picture is of an economy with growth held back by the continuing downturn in the housing market with some spillover into the consumer," Gault said.

Resources

July 2007 Manufacturing ISM Report on Business
Institute for Supply Management, Aug. 1, 2007

Gault, Bethune Lead Global Insight Team to Victory
by Rex Nutting
MarketWatch.com, July 9, 2007