The US manufacturing sector continued to grow in July, but the pace was impacted by dimming demand while price increases have slowed dramatically, according to an industry survey released Monday.
And amid a tight American job market, hiring slowed for the third straight month, but firms are reporting less trouble filling open positions and no signs of layoffs, the Institute for Supply Management's latest report showed.
But firms continue to have trouble filling orders due to ongoing problems getting materials.
ISM's manufacturing index dipped to 52.8 percent, just two-tenths below the prior month, but the lowest level since June 2020 during the pandemic downturn.
However, that level was still above the 50-percent threshold indicating expansion for the 26th consecutive month.
"The U.S. manufacturing sector continues expanding -- though slightly less so in July -- as new order rates continue to contract, supplier deliveries improve and prices soften to acceptable levels," ISM manufacturing survey chair Timothy Fiore said.
The new orders index fell 1.2 points, to 48 percent, signaling a slowdown, and production fell by slightly more but continues to grow.
"Lead times remain at elevated levels, and fundamental raw material prices continue to persuade buyers to remain on the sidelines," Fiore said
The prices index fell a whopping 18.5 points -- the fourth biggest decline on record -- to 60 percent, with a much higher share of firms reporting falling prices, the survey showed. The index has been above 60 percent for nearly two years.
Covid-19 lockdowns in China and Russia's war in Ukraine have been exacerbating shortages experienced, fueling the global inflation surge, especially for energy, and prompted the Federal Reserve to raise borrowing costs aggressively.
Survey respondents noted ongoing supply issues and the impact of rising prices, and several expressed concern about the future
"Our markets are still holding up; however, I believe a slowdown is coming," one said. "I believe the general market is in the beginnings of a recession."
Oren Klachkin of Oxford Economics said challenges are mounting for firms.
"Manufacturers will face many of the same challenges in the second half of 2022 that they did in H1," he said in an analysis.
"The confluence of hot inflation, higher interest rates, ongoing supply chain issues and normalizing spending patterns will make demand more fragile."