Morgan Stanley updated its projection for the July Institute for Supply Management - ISM - Manufacturing PMI to 53.8, an upward revision from a June reading of 53.3, the bank said in a note released Monday.
The bank said the change in its forecast reflects stronger manufacturing readings from Texas in July. Those state-level figures showed advances in demand and production, and Morgan Stanley noted that employment in the manufacturing sector continued to expand during the month.
Morgan Stanley highlighted the Dallas Federal Reserve's ISM-equivalent index as part of the basis for the revision. That index rose to 53.3 in July from 52.9 in the prior month, with the bank pointing to stronger production and new orders as the drivers of the increase.
At the same time, Morgan Stanley observed a moderation in price trends across the industry. Both input and output price measures decelerated in July, the note said. The bank also cautioned that the prices paid index may not yet have captured a recent uptick in energy costs.
On the question of supply dynamics, Morgan Stanley interpreted two contemporaneous signals - longer supplier delivery times and ongoing inventory accumulation - as consistent with stronger demand rather than a renewed set of supply chain constraints. In the bank's view, the pattern of slower deliveries alongside rising inventories points more toward demand-driven pressure on supply flows than to a fresh breakdown in supply chains.
The bank's revised PMI forecast, the Texas manufacturing data and the Dallas Fed index together form the factual basis Morgan Stanley used to adjust its outlook for July manufacturing activity. The note emphasized the combination of production, new orders and employment gains, together with the softer price gauges and the caveat about energy-related measurement, in explaining the updated projection.
Bottom line - Morgan Stanley raised its July ISM Manufacturing PMI forecast to 53.8, citing firmer Texas manufacturing metrics and an uptick in production and orders, while noting slower price measures and a potential undercapture of energy price pressures.