July Supply Managers

The Institute for Supply Management (ISM) released their July report for both its manufacturing and non-manufacturing measures.  The manufacturing index has been above 50 for 12 months now, completing a full year of growth.
One year of growth may appear to be a milestone, but the last four months deserve special attention.  The trajectory of this indicator has been falling since the recent peak in April.  The manufacturing side of the indicator is sensitive to the business cycle, so this slow down is worth noting.  The pace of backlogged orders has eased, indicating manufacturers are having an easier time keeping up with orders.  Inventories seem to be right where purchasing managers think they should be with a 50.5 reading.  In other words, the next sale may be taken off the shelf instead of needing to be manufactured.  Speaking of orders, new orders fell for a second month in a row and are now at 53.5 from 58.5 in June.  A reading under 50 suggests new orders are contracting, so this sharp deceleration will be monitored closely here at Atlas.
The second half the ISM report measures the environment for the non-manufacturing part of the economy.  It not only stayed above 50 in July, suggesting expansion, it grew from 53.8 to 54.3. The most encouraging part of the non-manufacturing ISM report is the employment component.  Last month this number was contracting ever so slightly at 49.7 and is now growing with a reading of 50.9.
When we consider that the manufacturing side of the ISM also added jobs, we see an official silver lining to the dark cloud known as the U.S. labor market.  It’s a thin sliver to be sure, but positive news is always welcome during these stormy times.