US factory output up but at slower pace in July

A job fair in the US. The country's employment index fell to 49.4 in July from 50.4 a month earlier, contracting for the seventh time in the past eight months.
A job fair in the US. The country's employment index fell to 49.4 in July from 50.4 a month earlier, contracting for the seventh time in the past eight months.PHOTO: REUTERS

NEW YORK • Manufacturing in the United States expanded in July, though at a slower pace, indicating a gradual improvement that could help the economy emerge from a weak first half of the year.

The Institute for Supply Management's (ISM's) index cooled to 52.6 from a one-year high of 53.2 a month earlier, the group's report showed yesterday. Readings above 50 indicate growth.

Factories cut back on employment even as orders and production remained strong, indicating producers are focused on cost-cutting as the economy struggles to gain speed. Stronger consumer spending is helping to limit the impact of weaker global demand and cutbacks in corporate investment.

"Business leaders remain cautious - they have to stay on top of this ever-changing operating backdrop," said Wells Fargo Securities' senior economist Sam Bullard before the report's release. "Firms aren't about to ramp up investment and hiring in this environment."

The ISM's gauge of new orders was little changed at 56.9 last month after 57 in June. A measure of production picked up to 55.4 from 54.7.

The employment index fell to 49.4 in July from 50.4 a month earlier, contracting for the seventh time in the past eight months.

The report also showed factory inventories shrank in July, while prices climbed at a slower pace.

"Over the near term, I think it's just going to be plodding along" in manufacturing, said chief US economist Josh Shapiro at Maria Fiorini Ramirez in New York.

Overseas economies have been treading water, limiting demand for American merchandise. While a government measure of manufacturing in China contracted, private gauges showed growth in July.

Euro zone manufacturing slowed in July as uncertainty after Britain's vote to leave the European Union dampened orders, according to Markit Economics.

A job report due on Friday from the US Labour Department is projected to show payrolls rose 175,000, in line with the 172,000 monthly average so far in 2016, according to the median estimate in a Bloomberg survey.

Federal Reserve policymakers last week said the US benchmark interest rate would stay unchanged at least until their next meeting in September. The officials are in a wait-and-see mode as they look for further progress on inflation, jobs and global growth prospects.

The Fed meeting took place ahead of the Commerce Department's report on Friday that showed gross domestic product rose at a 1.2 per cent annualised rate after a 0.8 per cent advance the prior quarter.

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A version of this article appeared in the print edition of The Straits Times on August 02, 2016, with the headline 'US factory output up but at slower pace in July'. Print Edition | Subscribe