ISM Reports Manufacturing Expansion, Slowing Supplier Deliveries

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Economic activity in the manufacturing sector expanded in June, and the overall economy grew for the 110th consecutive month, the Institute for Supply Management reported.

In its report, the ISM noted that the June PMI came in at 60.2%, which was a 1.5% increase from the May reading of 58.7%. Other indices to increase were the production index (up 0.8% to 62.3%), the supplier deliveries index (up 6.2% to 68.2%) and the inventories index (up 0.6% to 50.8%).

However, the new orders index slipped slightly, taking a 0.2% dip to 63.5%. The employment index also experienced a small drop, falling 0.3% to 56%. Prices for raw materials continued to rise despite a 2.7% decrease in the prices index to 76.8%.

“Comments from the panel reflect continued expanding business strength,” said Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee. “Demand remains strong, with the new orders index at 60% or above for the 14th straight month, and the customers’ inventories index remaining low.”

Of the 18 manufacturing industries, 17 reported growth in June, including transportation equipment, machinery and electrical equipment.

“The backlog of orders index continued to expand, reading at 60% [or] higher for the third consecutive month. Consumption, described as production and employment, continues to expand in spite of labor, skill and material shortages. Inputs, expressed as supplier deliveries, inventories and imports, had expansion increases, due primarily to negative supply chain issues,” Fiore said. “Lead-time extensions, steel and aluminum disruptions, supplier labor issues and transportation difficulties continue. Export orders expanded at higher rates. Price pressure remains strong, but the index saw its first expansion softening since November 2017. Demand remains robust, but the nation’s employment resources and supply chains continue to struggle. Respondents are overwhelmingly concerned about how tariff related activity is and will continue to affect their business.”

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