Manufacturing Indexes Show Strength

The manufacturing PMI posted a sizable improvement in July, at 52.9 for both the month's final and flash readings vs 51.3 in June. The 52.9 result is far from robust but robust is the word the report uses to describe new orders where strength includes export orders which posted their best showing in nearly 2 years. Employment is also a plus, rising at its best rate since July last year, while output also shows strength. Price data show a little strength with inputs, boosted by steel prices, at a 4-month high though selling prices remain flat. The rise in export orders is a major positive in this report, underscoring the benefits of this year's depreciation in the dollar and also perhaps hinting at a general rebound in global demand.

...meanwhile...

Employment fell slightly and delivery times shortened, two factors that held down the July ISM index to 52.6 vs June's 53.2. But that's not the important news. The important news is the new orders index which remains extremely solid, at 56.9 and pointing to future strength for employment as well perhaps as slowing for future deliveries (slowing in deliveries is an indication of strength in demand, of congestion in the supply chain).

Export orders are not as strong as domestic orders but they are respectable, at 52.5 which is safely above breakeven 50 to indicate monthly growth. The reading here echoes even stronger export results the manufacturing PMI which was released earlier this morning.

Production is solid in this report, at 55.4 for a 7 tenths gain in the month. Inventories are flat and prices for inputs are showing modest pressure.

But it's the new orders index that is the standout in this report and which hints at badly needed improvement in government data where new orders have yet to show strength. If the ISM orders pan out, the economy looks to get a second-half lift from its lagging sector, the factory sector.

Recent History Of This Indicator:
The ISM manufacturing index is expected to hold steady at a moderate but constructive 53.2 in July, unchanged from June which was the best reading since February last year. New orders were an outstanding highlight of the June report, at 57.0 and pointing to strength in production and employment for ISM's July report.