For the second month in a row manufacturers reported declines (chart 1) in overall business, as recorded by the Manufacturing ISM Report on Business for July.
Particularly worrisome for the future of the economy was a continued decline in both New Orders (chart 2) and Supplier Deliveries. These two components of the ISM are seen as leading indicators of economic strength or weakness. New Orders contracted for the second month in a row, while Supplier Deliveries (also known as Vendor Performance) contracted for the sixth month in a row. Backlogs of orders continued to decline as well, indicating that customers are planning to do less business with manufacturers in the future.
Comments from manufacturers show increasing uncertainty over the near-term future of their industries.
“We have noticed a marked slowing in business overall. [We] have confirmed this with other companies in our industry as well.” (Wood Products)
“Continued slowdown in government military sector spending in advance of the presidential elections has seriously impacted business performance.” (Transportation Equipment)
“Taking a conservative approach to spending including hiring, travel and inventory. U.S. economy seems stuck — at best — with little to no growth.” (Apparel, Leather & Allied Products)
“Business is softening, requiring some down production days.” (Furniture & Related Products)
“General state of business this month is flat, with increasing economic uncertainty.” (Chemical Products)