By Jeffrey Sparshott
U.S. manufacturers expanded at a slower pace in July, according
to a survey released Monday by the Institute for Supply Management,
the latest signs of tepid growth in the sector.
The ISM's manufacturing purchasing managers index fell to 52.7
in July from 53.5 in June. A reading above 50 indicates that the
manufacturing economy is generally expanding.
The July numbers are the latest in a string of mixed reports for
U.S. factories, which have struggled to overcome a stronger dollar,
weak overseas demand and a rocky first quarter.
"Obviously we've been kind of up and down, with signs of hope
followed by some level of disappointment," said Bradley Holcomb,
who oversees the ISM survey. "Nevertheless, you've got to like the
fact that we've been growing for 31 consecutive months. And I don't
see anything in terms of headwinds that would slow us down at
all."
In one positive sign, the ISM new orders index increased to 56.5
last month from 56 in June. The new orders component of the index,
now up for four straight months, is often viewed as a leading
indicator of activity. The ISM production index climbed to 56 from
54.
But the employment index decreased to 52.7 in July from 55.5 in
June, figures that may coincide with softer payroll gains for the
month. The Labor Department will release the July employment report
Friday. Economists surveyed by The Wall Street Journal think the
U.S. economy added about 215,000 jobs last month, down from 223,000
in June.
And the ISM exports index dropped to 48 from 49.5, a possible
reflection of soft global growth and the relative strength of the
dollar.
A separate survey out Monday also suggested solid gains for new
orders and production volumes alongside moderating job creation.
The final U.S. purchasing managers' index compiled by data provider
Markit ticked up to a seasonally adjusted 53.8 in July from a final
June reading of 53.6.
"On net, the surveys suggest a manufacturing sector that has yet
to shake off the malaise that has been apparent since the end of
last year, " said Jesse Edgerton, economist at J.P. Morgan
Securities.
The ISM survey also showed companies benefitting from lower raw
material prices and drawing down inventories.
Steel Dynamics Inc. is caught in the crosscurrents of falling
commodity prices, a strong dollar and signs of rising demand from
some U.S. industries. The Fort Wayne, Ind.-based company this
spring opted to idle its Minnesota ironmaking operations due to low
prices for iron ore and is fighting off a surge of cheaper imported
steel.
But Steel Dynamics expects expanding domestic auto and
construction industries to underpin demand the rest of the
year.
"We believe the fundamentals are supportive of stronger economic
growth in the U.S. during the second half of the year," Mark
Millett, president and CEO, told investors last month. "However,
the current unimpressive global growth expectation combined with
severe worldwide steel production overcapacity will continue to be
an industry headwind to steel pricing."
Write to Jeffrey Sparshott at jeffrey.sparshott@wsj.com