US manufacturing expands in July

Debbie Wademan, production supervisor, cuts the stars to proper length to make American flags at North American Manufacturing on June 28, 2021 in Scranton, Pa. Since 2016, the staff at North American Manufacturing on Barring Avenue has meticulously produced about 8,000 full-size American flags each year, which are sold to the Defense Logistics Agency and awarded to government retirees. (Jason Farmer/The Times-Tribune via AP)
Debbie Wademan, production supervisor, cuts the stars to proper length to make American flags at North American Manufacturing on June 28, 2021 in Scranton, Pa. Since 2016, the staff at North American Manufacturing on Barring Avenue has meticulously produced about 8,000 full-size American flags each year, which are sold to the Defense Logistics Agency and awarded to government retirees. (Jason Farmer/The Times-Tribune via AP)

WASHINGTON (AP) — Growth in U.S. manufacturing slowed for a second straight month in July amid ongoing supply-chain problems.

The Institute for Supply Management said Monday its index of manufacturing activity declined by 1.1 percentage points to a reading of 59.5. The index had also slowed in June, dropping to 60.6 from a reading of 61. in May.

Any reading above 50 indicates growth in the manufacturing sector. July was the 14th consecutive month manufacturing has grown after contracting in April 2020 when the coronavirus triggered nationwide business shutdowns.

But the July reading showed slower growth in new orders and production. Manufacturers have struggled in recent months with supply-chain bottlenecks.

“As we enter the third quarter, all segments of the manufacturing economy are impacted by near record-long raw-material lead times, continued shortages of critical basic materials, rising commodity prices and difficulties in transporting products” said Timothy Fiore, chair of the ISM manufacturing survey committee.

But there are some encouraging signs in the July report that suggest the various supply-chain and labor problems are beginning to recede, Fiore said.

For one, the index for employment improved sharply in the July report and is now back in growth territory. Fiore expects current labor shortages to ease and more people will join the labor force in coming months as expanded unemployment benefits tail off and students go back to school.

Others see the potential for sustained issues in the supply chain.

“Consumer demand will continue to provide a platform for manufacturing’s recovery from the pandemic-induced recession, but scarcity of intermediate goods, components and labor resources will act as a brake on the pace of growth, “Kurt Frankin, an economist at PNC, said in a research note.

The July report showed 17 of 18 manufacturing industries reported growth, led by furniture makers. The only industry reporting a decrease in July from the previous month was textile mills.