Manufacturing sector activity hits lowest level in two years

REAL ECONOMY BLOG | August 01, 2022

Authored by RSM US LLP

U.S. manufacturing sector activity continued to slow in July to its lowest level in two years as demand and prices cooled off, the Institute of Supply Management reported on Monday.

The manufacturing purchasing managers’ index inched down to 52.8 from 53 the previous month, still indicating growth as readings above 48.7 generally show business expansion.

The slowdown was driven by a contraction in the level of new orders, which are proxy for future demand, down from 49.2 in June to 48 in July. With the pullback in demand, inventories continued to improve, up to 57.3 from 56 previously.

We expect the slowdown to move toward a contraction in the coming months as our RSM US Manufacturing Outlook Index continues to flash signs of a tightening manufacturing sector.

A chart shows the ISM manufacturing index from 2010 through mid-2022

Another main factor in July’s dip was the sharp decline in prices paid for manufacturing products, which alleviates some inflation concerns. The subindex dropped to 60 from 78.5 in the prior month. This was likely due to softer demand and excess inventories, which were two of the most important reasons for economic contraction in the past two quarters.

The level of manufacturing employment was in contractionary territory for the third month in a row, although the pace of contracting slowed in July. This could be a sign that hiring freezes and layoffs, a result of aggressive rate hikes and an economic slowdown, may have spread to the manufacturing sector.

The impact of such rate hikes, however, might take more time to go through the entire sector. Many respondents to ISM’s survey acknowledged in their answers that while their businesses and demand were holding up, they did expect a slowdown coming. “Current order books are full, but there have been signs of a slowdown beginning in the fourth quarter,” a respondent in the plastics and rubber products industry said.

Let's Talk!

Call us at +1 213.873.1700, email us at or fill out the form below and we'll contact you to discuss your specific situation.

  • Topic Name:
  • Should be Empty:

This article was written by Tuan Nguyen and originally appeared on 2022-08-01.
2022 RSM US LLP. All rights reserved.

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

​Vasquez & Company LLP is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.

For more information on how ​Vasquez & Company LLP can assist you, please call +1 213.873.1700.

Subscribe to receive important updates from our Insights and Resources.

  • Should be Empty: