Economic activity in the manufacturing sector expanded in June for the sixth consecutive month, say the nation’s supply executives in the latest ISM Manufacturing PMI Report.
The report was issued by Susan Spence, chair of the Institute for Supply Management (ISM) manufacturing business survey committee.
“The Manufacturing PMI registered 53.3% in June, 0.7 percentage point lower than in May. The overall economy continued in expansion for the 20th month in a row. (A Manufacturing PMI above 47.5%, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index expanded for the sixth consecutive month after four straight readings in contraction, registering 56%, down 0.8 percentage point compared to May’s figure of 56.8%. The June reading of the Production Index (52.2%) is 2.1 percentage points lower than May’s reading of 54.3%. The Prices Index remained in expansion (or ‘increasing’ territory), registering 73%, a 9.1-percentage point decrease from May’s reading of 82.1%. The Backlog of Orders Index registered 50.5%, down 1.7 percentage points compared to the 52.2% recorded in May. The Employment Index registered 49.7%, up 1.1 percentage points from May’s figure of 48.6%,” Spence said.
“The Supplier Deliveries Index indicated slowing performance for the seventh month in a row after one month in ‘faster’ territory. The reading of 57.4% is down 3.2 percentage points from its May reading of 60.6%. (Supplier Deliveries is the only ISM PMI Reports index that is inversed; a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.) The Inventories Index registered 51.4%, returning to expansion territory and up 1.5 percentage points compared to May’s reading of 49.9%. The Customers’ Inventories Index reading of 42.3% is 0.4 percentage point lower compared to the 42.7% recorded in May,” Spence said. “The New Export Orders Index returned to contraction territory with a reading of 48.5%, 2.1 percentage points lower than the 50.6% registered in May. The Imports Index registered 52.9%, 0.1 percentage point lower than May’s reading of 53%.”
Spence added, “In June, U.S. manufacturing activity remained in expansion territory, growing at a slightly slower pace as compared to the month before. Of the five subindexes that make up the PMI, the New Orders and Production indexes grew slower as compared to the previous month, the Supplier Deliveries Index slowed at a slower rate, and the Employment and Inventories indexes improved with the latter entering expansion territory. In June, 34% of the comments were positive and 66% negative, with a 1-to-1.9 ratio of positive to negative sentiment. Among negative comments, the Iran war was mentioned in 31% and tariffs in 17%; 50% of the panelists mentioned pricing volatility as an issue for their companies.”
Spence continued, “In June, two of four demand indicators (New Orders and Backlog of Orders) were in expansion, and the Customers’ Inventories Index remained in ‘too low’ territory, contracting at a faster rate. A ‘too low’ status for the Customers’ Inventories Index is usually considered positive for future production. New Export Orders returned to contraction, losing 2.1 percentage points since May. Regarding output, the Production Index is in expansion for the eighth month in a row, and the Employment Index increased by 1.1 percentage points but remained in contraction. Among panelists, 36% indicated that managing head counts remains the norm at their companies, while 64% are hiring — a near reversal of those numbers from the start of the year (66% of companies were managing staff levels in the January report).”
Spence concluded, “Finally, inputs (defined as supplier deliveries, inventories, prices, and imports) were mixed, with the Supplier Deliveries Index decreasing 3.2 percentage points, the Inventories Index entering into expansion, the Imports Index losing 0.1 percentage point but staying in expansion, and Prices Index relief coming with a 9.1-percentage point drop, a reading of 73% versus 82.1% in May. Looking at the manufacturing economy, 5% of the sector’s gross domestic product (GDP) contracted in June, compared to 2% in May, and the percentage of manufacturing GDP in strong contraction (defined as a composite PMI of 45% or lower) was 3%, compared to 2% in May. The share of sector GDP with a PMI at or below 45% is a good metric to gauge overall manufacturing weakness. All but one (petroleum and coal products) of the six largest manufacturing industries expanded in June, in the following order: computer and electronic products; machinery; transportation equipment; chemical products; and food, beverage and tobacco products.”
The 14 manufacturing industries reporting growth in June — listed in order — are: printing and related support activities; electrical equipment, appliances and components; textile mills; primary metals; apparel, leather and allied products; fabricated metal products; computer and electronic products; machinery; plastics and rubber products; transportation equipment; nonmetallic mineral products; chemical products; miscellaneous manufacturing; and food, beverage and tobacco products. The three industries in contraction are: paper products; furniture and related products; and wood products.
