US manufacturing industry contracted again in July, with five key indicators showing weak performance.

On Friday, according to the latest report released by the Institute for Supply Management (ISM), the U.S. manufacturing sector continued to contract in July, marking the fifth consecutive month of decline after a brief two-month expansion earlier in the year. Prior to this, the industry had been in a slump for 26 consecutive months, indicating that the road to recovery for manufacturing is still uncertain. The report stated that the Manufacturing PMI for July was 48%, a 1 percentage point decrease from June. ISM explained that if the PMI remains above 42.3% in the long term, it usually indicates that the overall economy is in an expansion phase. Despite the pressures on manufacturing, the overall U.S. economy has been growing continuously for the past 63 months since the brief recession caused by the COVID-19 pandemic in April 2020. However, the intensified contraction in manufacturing in July indicates that the sector has not yet emerged from its sluggish period. Susan Spence, Chair of the ISM Manufacturing Survey Committee, stated in the report that the decline in manufacturing activity this month was mainly influenced by significant decreases in the "Delivery Performance" and "Employment" sub-indexes. While there has been some improvement in output, the overall indicators show that businesses remain cautious about future prospects. In terms of specific data, the New Orders Index recorded 47.1%, still in contraction territory but up 0.7 percentage points from June, indicating a slight slowdown in the decline of orders. The Production Index was 51.4%, up 1.1 percentage points from June, entering the expansion zone, reflecting some manufacturers increasing their production capacity. However, the Employment Index was 43.4%, further decreasing by 1.6 percentage points from the previous month, showing that businesses are generally maintaining their current workforce and are still cautious about hiring new employees. The Price Index recorded 64.8%, showing rising costs but significantly down from 69.7% in the previous month, indicating some easing of inflationary pressures. At the same time, the Backlog of Orders Index rose to 46.8%, an increase of 2.5 percentage points from the previous month, still in contraction but showing improvement in the backlog situation. In terms of supply chain, the Supplier Deliveries Index decreased to 49.3%, down 4.9 percentage points from June's 54.2%. ISM explained that this index is the only reverse index in the report where a number below 50% indicates an acceleration in deliveries, indicating an improvement in supply chain efficiency, partly due to slowing demand. The Inventory Index then fell to 48.9%, a slight drop of 0.3 percentage points from the previous month, showing that businesses continue to adjust inventory levels to match actual order levels. In terms of foreign trade, the New Export Orders Index was 46.1%, down 0.2 percentage points from June, while the Import Index was 47.6%, slightly higher than June's 47.4%. Both are in contraction territory, reflecting weak domestic and global demand. Spence stated that although production activity is increasing, employment has not followed suit, with most surveyed businesses indicating that their current focus is on "controlling manpower" rather than expanding their teams. While output indicators are on the rise, they have not led to increased hiring, indicating a lack of confidence in future market demand among businesses, with recruitment efforts remaining cautious. On the input side (including Supplier Deliveries, Inventory, Prices, and Imports), there was a more pronounced contraction. The Inventory Index re-entered contraction territory after a brief expansion in April, with businesses generally adjusting their inventory structures to meet current market demand. The speed of Supplier Deliveries increased, reflecting supply chain recovery but also indicating insufficient end demand putting pressure on logistics. Prices continued to rise, but at a slower pace, easing input cost pressures slightly. The report concluded by stating that approximately 79% of U.S. manufacturing industry output was in contraction in July, a significant increase from 46% in June. Of these, 31% of manufacturing industry GDP was in a state of "severe contraction" (PMI below 45%), higher than 25% in June. This data is considered an important indicator of the overall weakness of the manufacturing sector. It is worth noting that in June, four of the six major manufacturing industries in the U.S. were still expanding, but in July, all six industries fell into contraction, indicating comprehensive pressures on the industry. Despite some individual sub-indexes showing signs of improvement, overall manufacturing performance remains weak, with the contraction range expanding, indicating that the industry is currently struggling to break out of its slump. With inventory adjustments ongoing, low hiring intentions, and limited growth in orders, the U.S. manufacturing sector will need to carefully navigate market changes in the coming months.