Manufacturing activity grew more slowly in July

Manufacturing activity grew at a slower pace in July as low oil prices and a weak global economy amplified by the United Kingdom’s Brexit vote continued to hamper the industry.

An index of factory activity dipped to 52.6 from 53.2 in August, the Institute for Supply Management said Monday. A reading above 50 means the sector is expanding; below 50 indicates contraction. Economists expected a more modest drop to 53.

Still, manufacturing activity expanded for the fifth straight month after a string of declines.

A sluggish global economy has clobbered manufacturers’ exports, while a strong dollar has magnified the effects by making U.S. goods more expensive for overseas customers. Meanwhile, low oil prices have dampened drilling activity and the related production of steel pipes and other materials.

The good news is that this year, the dollar generally has eased while oil prices have edged up, notwithstanding recent volatility, helping the industry stabilize.

After last week's surprisingly feeble data on economic growth in the second quarter, the manufacturing report "should soothe fears that the U.S. economy is heading into a more serious downturn" economist Andrew Hunter of Capital Economics wrote in a research note.

In July, production picked up, with its index rising to 55.4 from 54.7. An index of new orders, a gauge of future output, fell slightly to 56.9 from 57.

A measure of employment declined more sharply, to 49.4 from 50.4. That could be a sign that the Labor Department’s closely watched payroll report this Friday will show that manufacturers cut jobs again. New export orders also dropped 1 point to 52.5 as the overseas troubles continue to mean volatile demand for U.S. producers,