02.08.2025 13:47

The US manufacturing sector experienced a slowdown in July, as indicated by a decline in the Institute for Supply Management (ISM) Manufacturing Purchasing Managers' Index (PMI). The PMI fell to 48.0, significantly lower than the anticipated 49.5 and June's reading of 49.0, signaling contraction within the sector. This underperformance fueled further bearish sentiment in the US dollar.

Further illuminating the sector's struggles, the Employment Index plummeted to 43.5 from 45.0 the previous month, highlighting ongoing hiring difficulties within US manufacturing. This contraction in employment stands in contrast to a slight increase in the Production Index, suggesting businesses are prioritizing output increases while remaining hesitant to expand their workforces. Inflationary pressures also showed signs of easing, with the Prices Paid Index falling from 69.7 to 64.8. Conversely, the New Orders Index experienced a modest uptick, rising from 46.4 to 47.1.

Susan Spence, MBA, Chair of the ISM Manufacturing Business Survey Committee, commented on the mixed signals, noting the increase in production alongside continued reluctance to hire. She highlighted the prevailing practice of managing existing headcount rather than actively recruiting new employees, even with the uptick in production, indicating a cautious approach among manufacturers.

This data release significantly impacted the US dollar, which traded noticeably lower on Friday. The US Dollar Index (DXY) hovered around 98.80, reflecting investor concerns fueled by the weak manufacturing data and growing speculation about a potential Federal Reserve interest rate cut in September. The market's response underscored the economic implications of the ISM PMI's disappointing performance.

Finally, it's important to note the distinction between GDP and the ISM PMI. While the PMI focuses specifically on the manufacturing sector's health, a country's Gross Domestic Product (GDP) provides a broader measure of overall economic growth. GDP is most accurately assessed by comparing growth rates across consecutive quarters or the same periods in different years. Annualized quarterly GDP figures then project that growth rate across the entire year. This distinction highlights the importance of considering multiple economic indicators for a complete picture of a nation's economic performance.