By Maria Martinez

U.S. manufacturing activity improved in July for the first time since February following the outbreak of Covid-19, data from a survey of the manufacturing sector compiled by IHS Markit showed Monday.

The final reading for the U.S. Manufacturing Business Activity Index for July was 50.9, slightly lower than the flash figure of 51.3 and up from 49.8 registered in June, IHS Markit said.

The U.S. Manufacturing PMI is a weighted average of new orders, output, employment, supplier's delivery times and stocks of purchases. A level above 50 indicates expansion, while a reading below 50 signals contraction.

Overall growth was marginal but stemmed from the first upturns in output and new orders for five months, as client demand picked up, IHS Markit said.

The contraction in employment softened despite further evidence of spare capacity as new sales rose and greater optimism in the outlook also was reflected in an improvement in business confidence, the report said.

Input prices rose solidly amid increased demand for inputs, while firms partially passed on higher costs to clients through an uptick in charges, IHS Markit said.

Output rose modestly in July, having its first expansion since February. Firms linked the increase to the resumption of operations at manufacturers and their clients. Some also noted that demand also began to rise.

However, Chris Williamson, chief business economist at IHS Markit said much of the recent improvement in output appears to be driven merely by factories restarting work rather than reflecting an upswing in demand.

New orders also increased for the first time since February, showing modest growth, the report said. However, new export orders declined slightly.

"Encouragingly, business optimism about the year ahead has revived to levels last seen in February, but many see the next few months being a struggle amid the ongoing pandemic, with a more solid-looking recovery not starting in earnest towards the end of the year or even into 2021," Mr. Williamson said.

Write to Maria Martinez at maria.martinez@wsj.com

(END) Dow Jones Newswires

August 03, 2020 10:24 ET (14:24 GMT)