U.S. Manufacturing Index Climbs To Three-Year High In July

(RTTNews) - Activity in the U.S. manufacturing sector expanded at a notably faster rate in the month of July, according to a report released by the Institute for Supply Management on Friday, with the index of activity in the sector climbing to a three-year high.

The ISM said its purchasing managers index rose to 57.1 in July from 55.3 in June, with a reading above 50 indicating growth in the manufacturing sector. Economists had been expecting the index to edge up to a reading of 56.0.

With the bigger than expected increase, the manufacturing index came in just above last November's reading of 57.0 and hit its highest level since reaching 58.9 in April of 2011.

Paul Dales, Senior U.S. Economist at Capital Economics, said, "At face value, the headline index is consistent with annualized GDP growth of almost 3.5% in the third quarter."

"That's pretty much in line with our expectations and is consistent with other evidence that domestic demand is strengthening," he added.

The bigger than expected increase by the headline index was partly due to faster job growth in the manufacturing sector, as the employment index jumped to 58.2 in July from 52.8 in June.

The Labor Department report released earlier in the day showed that the manufacturing sector added 28,000 jobs in July following an increase of 23,000 jobs in June.

The ISM also said the new orders index surged up to 63.4 in July from 58.9 in June, while the production index rose to 61.2 from 60.0.

On the other hand, the report said the inventories index tumbled to 48.5 in July from 53.0 in June, indicating a contraction. The export index also dipped to 53.0 from 54.5.

Bradley J. Holcomb, chair of the ISM Manufacturing Business Survey Committee, said, "Comments from the panel are generally positive, while some indicate concern over global geopolitical situations."

With regard to inflation, the report showed that the prices index climbed to 59.5 in July from 58.0 in the previous month.

Next Tuesday, the ISM is scheduled to release a separate report on activity in the service sector in the month of July.