US manufacturing sector contracts in July amid tariff worries

(Sharecast News) - The US manufacturing sector contracted in July for the first time this year as concerns about tariffs took their toll, according to a survey released on Friday. The S&P Global manufacturing purchasing managers' index fell to 49.8 from 52.9 in June. This was below the 50.0 mark that separates contraction from expansion and followed six successive months of growth.

The survey highlighted some softness in market demand, with new orders up only fractionally and to the weakest degree of the year so far.

Panellists pointed ongoing client uncertainty, particularly as regards tariffs. This led to continued hesitancy in committing to new orders, mainly among international clients.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: "July saw the first deterioration of manufacturing operating conditions since last December as tariff worries continued to dominate the business environment.

"The downturn at the start of the third quarter in part reflects the passing of a busy period of tariff-related inventory accumulation in prior months. Factories reported little change in inflows of new orders and reduced stock holdings of both raw materials and finished goods in July. This comes after companies had built up inventories in May and June amid concerns over higher import prices and worsening supply availability resulting from tariff hikes.

"Input prices continued to rise at a steep rate, with these higher costs often being passed on to customers to drive another month of elevated selling price inflation, but there are signs that these price pressures may have peaked back in June.

"Optimism about the year ahead has meanwhile taken a knock as factories worry about reduced demand from customers, especially in export markets, and the inflationary impact of tariffs. Employment consequently fell as factories trimmed headcounts amid concerns over rising costs and lower sales."