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U.S. Manufacturing Sector Continues to Expand

July marked the 12th straight month of manufacturing growth, although the pace is slowing somewhat. The Institute for Supply Management's manufacturing gauge registered 55.5 last month, which was down from 56.2 in June. Despite this slowdown, analysts feel the sector will continue to expand, at least in the short term.

"The ISM report shows that manufacturing activity is in the middle of the index's growth range. Manufacturing activity is decelerating but the pace of growth is slowing from a rapid pace," said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI.

A rebound in consumer purchases of big-ticket items is leading production activity. Production is now being driven more by high-tech, equipment investment, and exports than by a swing in inventory.

"A reorientation of the U.S. economy more towards investment and exports is a positive direction," Meckstroth added.

"Surprisingly, the ISM report suggests that manufacturers are planning to add more workers. The increase in standard hours and overtime hours has allowed industrial firms to post strong growth without adding many workers; the ISM employment index indicates manufacturing firms plan to aggressively add people. Overall, the ISM report was very positive and is a relatively robust start to the second half of the year."

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