July’s United States manufacturing activity report indicated a slowing that was less than expected. Signs of supply chain disruptions easing were shown too as well as prices paid for imports by factories reaching a two-year low.

The index of national factory activity dipped to 52.8 in July, the lowest since June of 2022, according to the Institute for Supply Management. The PMI index associated with the IMS was reading 53.0 in June. Readings above 50 indicate forms of expansion within the manufacturing sector which accounts for nearly 12% of the United States economy.

A shift in spending back to services from goods and rising interest rates are reflected in the data. Last week, the Fed raised its policy rate by another 75bps and in total has hiked that rate by 225bps since March.

The forward-looking new orders sub-index fell off to 48.0 in July from a reading of 49.2 in June. This is the second straight monthly contraction suggesting a further slowdown in manufacturing for the upcoming months (when paired with a steady decline in order backlogs). The continued growth of manufacturing however tells some economists that the economy is not in a recession despite the actual definition of a recession is two consecutive quarters of negative GDP growth.

Supply chain issues have also been easing according to the data. The supplier deliveries figures have dropped to 55.2 from 57.3 in June. Readings above 50% indicate slower deliveries being made to factories. A measure of prices paid by manufacturers dropped to 60.0 which is the lowest level since August 2020 and down from a June recording of 78.5. However, low inflation is still something that is far far away.

Factory employment rose to 49.9 but still remained in the territory of contraction for a third straight month. Tech giants such as Tesla have been laying off workers as well as limiting hiring in general. 11.3 Million unfilled jobs were recorded at the end of May — nearly two job openings for every unemployed individual.