The ISM® (Institute for Supply Management®) Manufacturing PMI® reported in at 46.4% for July, as business activity increased 0.4 percentage points from the previous month. A value below 50% is indicative of a shrinking economy. This marks the nineth consecutive month in contraction territory after 30 months of growth. “The U.S. manufacturing sector shrank again, but the uptick in the PMI® indicates a marginally slower rate of contraction. The July composite index reading reflects companies continuing to manage outputs down as order softness continues”, said Timothy Fiore, chairman of the ISM® Manufacturing Business Survey Committee. Of the six largest manufacturing industries, only petroleum & coal products recorded growth in July. The forward-looking new orders sub-index contracted for the 11th consecutive month, increasing 1.7 percentage points and improving to 47.3%. The Prices Index which measures what companies pay for raw materials and other supplies showed a slower rate of price decreases, up 0.8 percentage points to 42.6%., this after a dramatic fall into contraction (or "decreasing") territory in May after one month in expansion. The Employment Index decreased by 3.7 percentage points to 44.4%, contracting for a second month after two months of expansion preceded by two months of contraction. This is its lowest reading since July 2020’s 43.7%. The Backlog of Orders Index increased 4.1 percentage points to 42.8% and has now contracted for the tenth consecutive month following 27 months of expansion.

S&P Global reported that its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, fell to 52.0 in July from 53.2 in June. While it is the lowest reading since March 2023, it marks the sixth straight month above 50, indicating growth in the private sector. While manufacturers moved out of contraction territory, overall growth was reduced by a slower expansion in services. Inflationary pressures remained historically elevated in July, as service providers were challenged with increases in input costs and output charges. Manufacturing did see a rise in employment, although the rate of employment growth was somewhat muted, as pressure on manufacturing capacity diminished. The S&P Global US Services PMI Business Activity Index dropped to 52.3 from 54.4, The rate of growth was the softest since February 2023. Greater output was attributed to a sustained increase in new orders and continued demand from existing customers. Chris Williamson, Chief Business Economist at S&P Global commented, “With the weakening service sector expansion accompanied by a near-stalled manufacturing sector, the overall message from the surveys is that economic growth weakened at the start of the third quarter, cooling to an annualized rate of around 1.5%.”

The U.S. Bureau of Labor Statistics reported 187,000 jobs were added as the unemployment rate dropped to 3.5% in July from 3.6% the previous month. May and June’s employment readings were revised for a combined (-49,000) jobs. The number of unemployed workers was little changes at 5.8 million. Health care added (+63,000) jobs, followed by social assistance (+24,000), financial activities (+19,000), wholesale trade (+18,000), and leisure and hospitality (+17,000). Employment in professional and business services declined (-8,000). Among the unemployed, the number of permanent job losers decreased (-121,000) to 1.37M, while the number of reentrants to the labor force increased (+108,000) to 1.85M. The labor force participation rate was 62.6% for the fifth consecutive month. Average hourly earnings increased by 0.4% in July. At $33.74 average hourly earnings are up 4.4% from a year ago.