Factories hummed as manufacturing activity grew in the U.S. in July. But its growth slowed for a second straight month as people shift their spending to services from goods.
The Institute for Supply Management reported Monday that its national factory activity index fell to 59.5 in July from 60.6 in June. A reading above 50 indicates expansion.
Spending on manufactured products remained strong. But that pace is also cooling. More vaccinated Americans are splurging on services as they venture outdoors, travel, dine out and visit entertainment venues.
What’s more, shoppers are encountering shortages of vehicles and appliances for sale. A global chip shortage is hurting production of cars and trucks.
But investors got positive news on inflation. The ISM said factories paid lower prices in July. That backs Federal Reserve Chair Jerome Powell’s contention that inflation is likely temporary.
And in an encouraging sign for the employment report that comes out Friday, manufacturers hired more workers. Factory employment rebounded after contracting modestly in June.