The Institute for Supply Management (ISM) said that the manufacturing sector contracted in July for the second straight month. The purchasing managers’ index (PMI) was virtually unchanged, up from 49.7 in June to 49.8 in July. Prior to last month, the PMI had not been below 50 – its threshold for expansion – since July 2009. This shows that manufacturing activity has stalled, with rising uncertainties weighing heavily on the minds of business leaders and consumers.

One of the more troubling elements in this survey is the fact that new orders and new export orders continue to contract, with readings of 48.0 and 46.5 for July. Slower growth around the world is definitely hurting sales. Earlier today, for instance, Markit announced that manufacturing production in the Eurozone continues to decline, with its Eurozone PMI falling to 44.0. All of this is not good news for future production in the United States.

There were some positive signs in the ISM report. Production and employment growth remain in expansion territory, even as the pace of this growth has slowed. The production index, which stood at 61.0 in April, has declined to 51.3 in July and it was 51.0 in June.

Another piece of welcome news is that pricing pressures continue to ease, with the prices paid for inputs index at 39.5. Lower petroleum and other raw material prices have benefited producers.  Meanwhile, inventories contracted less sharply for the month. (continue reading…)

The Institute for Supply Management (ISM) released its Purchasing Managers Index for manufacturing this morning, showing a decline from 54.8 in April to 53.5 in May. On the one hand, this represents the 34th consecutive month of expansion in the manufacturing sector, and yet, it also indicates a slower pace of growth, particularly for new orders. Such weaknesses have been seen in other recent indicators, as well, including today’s jobs report.

Looking specifically at various components of the index, though, it was not all bad news. Several components noted a pickup in activity in May, including production which rose from 55.6 to 61.0. Similar improvements were seen with employment and exports.

Inventories continue to contract, but at a slower rate. Meanwhile, prices for raw materials shifted from rising sharply last month to moving lower this month, essentially because of falling energy costs.

Overall, this is a mixed report. Slower growth for new orders is not positive, especially as it is a proxy of future activity. And yet, improvements in some measures point to continued expansion in the sector. The selected comments from survey respondents tend to mirror this, with some suggesting modest to strong growth in sales and production while others note recent and perhaps unexpected weaknesses.

Given the slower pace of growth for both jobs and manufacturing activity, it is clear that rising levels of anxieties from Europe and elsewhere might be having an impact. A growing global and U.S. economy is important for manufacturers to sustain their expansion and it will be incumbent on policymakers to adopt measures that will get the economy moving again, while also reducing tax and regulatory uncertainties.

Chad Moutray is chief economist, National Association of Manufacturers.