Chicago NAPM index drops further in July, contrary to forecasts

One of the more closely-followed gauges of US manufacturing sector activity unexpectedly weakened again last month, amid indications of muted demand and with employment at its weakest since October 2009.

Market News International's Chicago Purchasing Managers' Index fell from a reading of 49.7 in June to 44.4 for July, missing economists' forecasts for an improvement to 51.8.

"The weakness in the Barometer observed in Q2 continued into the current quarter, with the latest outturn making it the weakest start to Q3 since 2009," MNI said in a statement.

A sub-index for production hit a 10-year low, while another linked to employment fell into contractionary territory for the first time since October 2017 and was at its weakest since October 2009, MNI added.

The drop in new orders meanwhile continued to accelerate.

According to MNI's senior economist, Shaily Mittal, firms were not yet panicking but with companies facing in the Chicago area facing global risks, trade tensions, slowing demand and "sombre" growth expectations, the survey results did support calls for an easing approach by the Federal Reserve - albeit a "gradual one".

Two in five respondents to a special question in the July survey regarding their views on the outlook for the US economy in the back half of 2019 said they foresaw slower growth than at present, with some attributing that to tariffs.

A majority of respondents, at 46.0%, expected no change in the economy's pace of expansion but only 14% anticipated that the economy would pick up.