Manufacturing ISM Eases Back to Recent Trend Growth Rate

Manufacturing ISM slipped to 53.8 in July (consensus 55) from its recent high of 56 last month. This puts the index exactly at its monthly average level for the past 18 months, and indicates healthy growth. A reading above 50 indicates expansion. Prices paid fell a larger than expected amount, from 67 to 65. Prices paid remain elevated, but have fallen to the lowest level since January due to lower energy and metal prices.

New export orders were one of the few categories to show improvement in July, indicating that foreign demand is helping offset softening domestic retail demand. Unfortunately, production, new orders, and order backlogs all fell, with production down an unusually large -7 MoM, but all remain above 50. All inventory gauges showed higher readings, which is a concern following the recent efforts to reduce excess inventories. Employment weakened to a four month low, supporting the weakening manufacturing employment data reported by ADP this morning.