Industrial activity shrinks less than estimated in July

Industrial activity shrinks less than estimated in July

08-07-2009 14:06

The Institute for Supply Management (ISM) published a report today, which demonstrated that the industrial sector continues to shrink in July, while it also proved that production and new orders progressed considerably. The index of manufacturing activity by the Institute for Supply Management climbed to 48.9 in July from June’s 44.8, despite the fact that every value below 50 suggests a contraction. Economists projected a weaker rise of 46.5.

Industrial activity

The new orders index rose strongly from 49.2 in June to 55.3 in July, as the reversal in new orders contributed to the weaker shrink. Production progressed faster than in the previous month, as the production index climbed from 52.5 in June to 57.9 in July. Norbert J. Ore, chairman of the ISM manufacturing business survey committee, stated that the considerable increases of the new orders and production indices surpassing 50, result in prospects for potential growth in the manufacturing sector.

Employment

Furthermore the report demonstrated that the employment index climbed from 40.7 in June to 45.6 in July. However, it remains an indication of falling employment in the manufacturing sector. The inventories index rose to 33.5 in July in comparison with 30.8 in June, while inventories continue to shrink.

Recovering worldwide economy

The chairman of the ISM manufacturing business survey committee commented: “Inventories and employment indices continue to contract, but the pace is easing and they are heading for the right direction.” He also indicated that the new export orders index improved after nine straight months of decreasing, as it went up from 49.5 in June to 50.5 in July. Ore commented that this indicates that the worldwide economy is recovering. The chairman went on by saying: “On the whole, it would be hard to persuade producers that we are close to a recovery, although the figures implicate that growth will return in the third quarter of this year if the tendencies endure.”

Inflation

The report also proved that the prices index went up from 50.0 in the previous month to 55.0 in July, implicating that prices are increasing while they remained unchanged in June. The Institute for Supply Management will publish its report regarding activity in the service sector Wednesday morning, which will give a more extensive reading of the economy’s situation. The service sector gauge is projected to climb from 47.0 in June to 48.2 in July.