US manufacturing holds up better than expected in July, price pressures recede
By Alexander Bueso
Date: Monday 01 Aug 2022
(Sharecast News) - Factory sector activity in the US held up better than expected last month, the results of a key survey revealed.
But respondents' answers betrayed caution when it came to the outlook for new orders, staff availability and the risk of raw materials shortages.
Price pressures on the other hand retreated sharply.
The Institute for Supply Management's manufacturing sector Purchasing Managers' Index dipped from a reading of 53.0 for June to 52.8 in July (consensus: 52.1).
Historically, the index needed to fall well beneath the breakeven threshold of 50 points, into the low 40s, to be considered consistent with a recession, said economists at Barclays Research.
Nevertheless, the key sub-índex linked to new orders did slip further into contractionary territory, receding from June's print of 49.2 to 48.0.
Employment on the other hand improved a tad, with the corresponding sub-index revealing a slower pace of job losses with a rise from 47.3 to 49.9.
Worth noting, the sub-índex for the prices paid by companies registered a big drop, from 78.5 to 60.0.
Commenting on the latest survey results, Andrew Hunter, senior US economist at Capital Economics, said they were consistent with third quarter US GDP growth of around 1.5%.
However, the underlying details, such as the declines in the sub-index for output and that for new orders, were "a bit more concerning" than the headline PMI figure, he added.
"Overall, the activity components of the survey suggest that the nascent manufacturing downturn has further to run, as weak global growth and the stronger dollar take their toll, but they aren't yet signalling a severe downturn in the wider economy.
"While we expect strong services inflation to keep the Fed hiking rates over the rest of this year, the sharp fall in the ISM prices index, to 60.0 in July from 78.5, suggests core goods inflation is set to slow quite sharply."
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