ISM Manufacturing Index:  The Institute for Supply Management’s composite manufacturing index moved down 1.1 points month on month (m/m) to 59.5 for July 2021; this value is stronger than the forecast of 50.  The new orders sub-index scored a 64.9. Overall, the ISM manufacturing index is strong, while the global economy is beginning to strengthen again following shutdowns throughout Covid-19.

The ISM manufacturing index is based on surveys of 300 purchasing managers in 18 industries. The survey is a diffusion index calculated as a percent of responses. A value of 50 is neutral, while less than 50 denotes contracting manufacturing activity and greater than 50 denotes expanding activity.

Figure 1 breaks down the composite index and sub-indexes. The backlogs sub-index was highest this month at 65.0, while the inventories sub-index was lowest at 48.9.

Seventeen of 18 manufacturing industries reported growth in July, in the following order: Furniture & Related Products; Printing & Related Support Activities; Apparel, Leather & Allied Products; Miscellaneous Manufacturing; Computer & Electronic Products; Nonmetallic Mineral Products; Machinery; Fabricated Metal Products; Paper Products; Chemical Products; Food, Beverage & Tobacco Products; Primary Metals; Plastics & Rubber Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Wood Products; and Petroleum & Coal Products. The only industry reporting a decrease in July compared to June was Textile Mills.

“Strong operations, with new programs, orders and launches continue to have hiring difficulties and are unable to fill production and salaried jobs due to a lack of candidates. Raw materials are still in short supply, with longer lead times.” [Fabricated Metal Products]

At Gerdau, we closely monitor the ISM manufacturing index since it is an excellent barometer of the present strength, as well as a window on the likely short-run future, of U.S. manufacturing.