US manufacturing struggles with ninth month of contraction

WASHINGTON — The US manufacturing sector saw activity contract for a ninth straight month in July, survey data showed Tuesday, as new orders declined on cooling demand while companies reduced production and headcount.

The Institute for Supply Management's (ISM) manufacturing index came in at 46.4 per cent last month, inching up from 46 per cent in June and indicating a slower rate of contraction — but this was still firmly below the 50-per cent threshold indicating growth.

"Demand remains weak but marginally better compared to June, production slowed due to lack of work, and suppliers continue to have capacity," said ISM survey chief Timothy Fiore.

"There are signs of more employment reduction actions in the near term to better match production output," he added.

The weakness comes as demand for goods took a hit from shifting consumption towards services, while the Federal Reserve's tightening of monetary policy has also impacted company spending.

To rein in surging inflation last year, the US central bank has been lifting interest rates to ease demand, and its actions are rippling through the world's biggest economy.

For July, the ISM report showed that the new orders and production indexes both saw slight improvements but remained in contraction, while employment plunged further.

Two manufacturing industries — petroleum and coal products, as well as furniture and related products — reported growth in July while 16 others shrank, ISM said.

"Sales in our industry are extremely slow entering into the second half of the year, and no upturn is expected until at least the fourth quarter," said a survey respondent from the chemical products sector.

Another respondent noted that semiconductor trade restrictions against China have "negatively impacted" North America industrial business.

Meanwhile, a "widely anticipated boost from China's reopening has amounted to very little," said economists from Pantheon Macroeconomics in a recent report.

"More generally, we see few signs of a looming improvement in the outlook," Pantheon economists said.