The latest report by IHS Markit revealed on Monday the seasonally adjusted IHS Markit final U.S. Manufacturing Purchasing Managers’ Index (PMI) stood at 50.9 in July, up from June’s reading of 49.8 but lower than the earlier released “flash” reading of 51.3. The reading signaled a marginal improvement in the performance of the U.S. manufacturing sector, the first since February.

Economists had forecast the index to stay unrevised at 51.3.

According to the report, overall growth was marginal but stemmed from the first upturns in output and new orders for five months, as client demand picked up. Meanwhile, the contraction in employment softened despite further evidence of spare capacity as new sales rose. On the price front, input prices rose solidly amid increased demand for inputs, whilst firms partially passed on higher costs to clients through an uptick in charges.

Chris Williamson, Chief Business Economist at IHS Markit noted: “Although indicating the strongest expansion of the manufacturing sector since January, the IHS Markit PMI remains worryingly weak. Much of the recent improvement in output appears to be driven merely by factories restarting work rather than reflecting an upswing in demand. Growth of new orders remains lacklustre and backlogs of work continue to fall, hinting strongly at the build-up of excess capacity. Many firms and their customers remain cautious in relation to spending in the face of re-imposed lockdowns in some states and worries about further disruptions from the pandemic.”