ISM Manufacturing Index Misses Expectations
The Institute for Supply Management's Manufacturing Index was released Wednesday and missed economist estimates. The index printed at 49.8 for July, higher than June's 49.7 but lower than economist expectations of 50.2. The reading below 50 in July marks the second consecutive month of declines in the index.
The headline PMI did improve from June, but still showed contraction in the U.S. economy. The slowdown can be attributed to continue declines in employment, trade and new orders. The employment sub-index had a huge drop in July, falling 4.6 percentage points to 52.0 from 56.6. New orders did rise marginally but still showed contraction in July, rising to 48.0 from 47.8 in June. New orders are notably used as a leading indicator for future reports, and so a bounce in new orders could indicate slight growth in next month's ISM. Lastly, the trade figures were weak, with both exports and imports contracting further in July.
The sub-index did show some signs of stabilization after plummeting over the last few months. The sub-index rose to 39.5 from 37 in June, as oil prices and other commodities rebounded. Oil prices fell more than 20 percent peak to trough starting in May but have since rebounded back near $90 per barrel in WTI futures. The Institute did note that corn prices and natural gas prices rose notably in the month.
The weak data comes ahead of the Federal Reserve's interest rate and policy decision later Wednesday. The Federal Reserve will obviously take into account this data, as it is current and generally a good indicator of growth. Also, the non-Manufacturing Report, due out on Friday for the public, will most likely have been delivered to Fed officials already and that will be taken into account as well. Due to the fact that the service sector is much larger than the manufacturing sector in the U.S., this may have more of an impact on policy than Wednesday's report.
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