US manufacturing improves in July, future clouded by virus

Business

FILE – In this Wednesday, May 13, 2020 file photo, Ford Motor Co. employees work a ventilator at the Rawsonville plant in Ypsilanti Township, Mich. The plant was converted into a ventilator factory, as hospitals battling the coronavirus report shortages of the life-saving devices. According to the Institute for Supply Management, U.S. manufacturing rebounded in June 2020 as major parts of the country opened back up, ending three months of contraction in the sector caused by the coronavirus pandemic. (AP Photo/Carlos Osorio)

WASHINGTON (AP) — U.S. manufacturing improved again in July with a key gauge of activity rising further into expansion territory.

The Institute for Supply Management, an association of purchasing managers, said Monday that its manufacturing index rose to 54.2 last month, up from a June reading of 52.6. Any reading above 50 signas that U.S. manufacturing is expanding.

The index dipped below 50 in March, indicating a recession in manufacturing as the coronavirus pandemic shut down factories. The overall economy fell into a recession in February and the government reported last week that the gross domestic product plunged at an annual rate of 32.9% in the April-June quarter, the biggest drop on records going back to 1947.

While it was the second straight month that the index has been above the 50 threshold, indicating manufacturing is expanding again, economists cautioned that the outlook is clouded by spreading infections in the U.S. in the South, West and Midwest.

“Manufacturing is recovering from low levels and the outlook is uncertain, given the threat of repeated disruptions from virus outbreaks,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

Timothy Fiore, chair of the ISM manufacturing survey committee, said it was encouraging that positive comments from survey participants were running two to one ahead of more cautious comments.

The index tracking new orders posted a strong gain of 5.1-percentage points from the June reading while the production index was up 4.8 percentage points. The orders backlog index was also up.

Of 18 manufacturing industries, 13 reported growth in July led by wood products and furniture and related products. The three industries reporting contractions in July were transportation equipment, machinery and fabricated metal products.

“The health and economic crisis are inextricably linked and the economic recovery cannot be ensured until the impact of the virus is contained,” said Oren Klachkin, lead U.S. economist for Oxford Economics. “We expect manufacturing to grow gradually ahead with botched management of the pandemic and ongoing virus-related uncertain set to constrain activity.”

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