The Institute for Supply Management’s index cooled to 52.6 from a one-year high of 53.2 a month earlier, the group’s report showed yesterday. Readings above 50 indicate growth.
Factories cut back on employment even as orders and production remained strong last month, indicating producers are focused on cost-cutting as the economy struggles to gain speed.
Stronger consumer spending is helping to limit the impact of weaker global demand and reductions in corporate investment.
“Over the near term, I think it’s just going to be plodding along, slow growth” in manufacturing, said Josh Shapiro, chief US economist at Maria Fiorini Ramirez in New York.
The ISM’s gauge of new orders was little changed at 56.9 last month after 57 in June. A measure of production picked up to 55.4 from 54.7.
The employment index decreased to 49.4 in July from 50.4 a month earlier, contracting for the seventh time in the past eight months.
The report also showed factory inventories shrank in July, while prices climbed at a slower pace.
Overseas economies have been treading water, limiting demand for American merchandise. While a government measure of manufacturing in China contracted, private gauges showed growth in July.
Eurozone manufacturing slowed in July as uncertainty following Britain’s vote to leave the EU damped orders, according to Markit Economics.