The overall economy grew for the 111th straight time, the Institute for Supply Management reported Wednesday.
According to the ISM's monthly report on business, the ISM index decreased to 58.1 in July from 60.2 in June.
Economists polled by IFR Markets predicted the index would be 59.5.
An index reading below 50 signals a slowing economy, while a level above 50 suggests expansion. A reading of 50 shows the sector was unchanged in the month.
The prices paid index decreased to 73.2 from 76.8, indicating higher raw materials prices for the 29th consecutive month. The employment index grew to 56.5 from 56.0.
The production index slipped to 58.5 from 62.3, the new orders index fell to 60.2 from 63.5; the supplier deliveries index dropped to 62.1 from 68.2; the export orders index slid to 55.3 from 56.3; and the imports index declined to 54.7 from 59.0.
The inventories index rose to 53.3 from 50.8; the customers' inventories index slipped to 39.4 from 39.7; and backlog of orders dropped to 54.7 from 60.1.
Respondents' comments included:
- “Global demand is still strong. Working on contingency plans for the Chinese tariffs. We will probably onshore most of that material. Labor availability is becoming an issue.” (Computer & Electronic Products)
- “As a result of new tariffs on materials to/from China, we are taking measures to move impacted materials ahead of effective dates, which in some cases is resulting in holding higher inventories.” (Chemical Products)
- “Steel cost increases are causing a lot of negotiations. The increases are real and will affect costs beginning in the third quarter of 2018.” (Electrical Equipment, Appliances & Components)
- “Reviewing the business case for importing manufactured parts from China, as new tariffs will lead to increased costs that we will pass along to our domestic customers.” (Transportation Equipment)
- “Corn and soybean meal costs are reducing. Labor continues to be a struggle to fill open positions.” (Food, Beverage & Tobacco Products)
- “The steel tariffs are a concern to us. We have already seen steel prices increase due to the threat of the tariffs and are seeing kickback from our customers due to the higher prices. We are concerned that the end customer will go to off shore to purchase the finished product.” (Fabricated Metal Products)
- “Business is moving along at a brisk pace, outperforming the annual plan year-to-date (calendar year financials). However, internationally, nationally and locally, we are finding many manufacturers behind schedule due to capacity constraints. They are stating their order intake is heavy and/or they cannot find qualified employees to get all the work done.” (Machinery)
“Tariffs are [resulting in] customs inspection-time increases on imported raw materials from China. Logistics seems to be improving, but we are seeing a [continuing] tight chemical bulk tanker market.” (Plastics & Rubber Products)“Our customer demand is high, but supply of aluminum is tight. Also, tariffs are negatively affecting our bottom line, as we are unable to pass increases to all of our customers. Plus, we are seeing increases in our construction costs because of the steel price increases. Labor market is extremely tight for professional personnel, plant technicians and support associates.” (Primary Metals)
“The so-called trade war is now taking its toll on business activity, resulting in substantial reductions to new export orders. China has all but stopped taking orders, causing inventories to build up in the U.S. Domestic business is steady. However, it is too small to carry the load that export markets have retreated from. As a result, we will be meeting as a corporation next week to recast our second-half sales and revenue projections.” (Wood Products)
