U.S. manufacturing softened in July as producers grappled with supply bottlenecks and input shortages.
The Institute for Supply Management’s (ISM) gauge of factory activity eased for a second consecutive month, to 59.5 from June’s 60.6. Readings above 50 indicate expansion. Analysts had expected a July reading of 61.
Order backlogs edged up to an elevated level as a measure of production cooled, suggesting supply and shipping challenges are restraining manufacturing growth.
Because of production constraints, factories have had to draw down stockpiles to keep up with robust demand growth. In the second quarter, business equipment investment posted another solid gain and consumer spending accelerated to one of the fastest paces in decades, U.S. government figures showed last week.
The ISM’s index of customer inventories slumped to a record low last month. Replacing those depleted inventories should fuel output gains in future months, but when those production constraints will ease is not clear.
The group’s gauge of prices paid for raw materials cooled in July to a still strong 85.7 after rising in the prior month to the highest level since 1979.
Seventeen of 18 U.S. manufacturing industries reported growth in July led by furniture, printing and apparel. The report also showed the average lead time for materials used in the production process eased slightly to 86 days in July from a record 88 days in June.