Manufacturing Economic Activity Grows in June Despite Decline in Some Metrics

According to the latest Manufacturing ISM Report on Business, economic activity in the manufacturing sector grew in June, with the overall economy achieving a 25th consecutive month of growth.

“The June Manufacturing PMI registered 53%, down 3.1 percentage points from the reading of 56.1% in May. This figure indicates expansion in the overall economy for the 25th month in a row after a contraction in April and May 2020. This is the lowest Manufacturing PMI reading since June 2020, when it registered 52.4 %,” Timothy R. Fiore, CPSM, CPM, chair of the Institute for Supply Management’s manufacturing business survey committee, said. “The New Orders Index reading of 49.2% is 5.9 percentage points lower than the 55.1% recorded in May. The Production Index reading of 54.9% is a 0.7-percentage point increase compared to May’s figure of 54.2%. The Prices Index registered 78.5%, down 3.7 percentage points compared to the May figure of 82.2%.

“The Backlog of Orders Index registered 53.2%, 5.5 percentage points below the May reading of 58.7%. The Employment Index contracted for a second straight month at 47.3%, 2.3 percentage points lower than the 49.6% recorded in May. The Supplier Deliveries Index reading of 57.3% is 8.4 percentage points lower than the May figure of 65.7%. The Inventories Index registered 56%, 0.1 percentage point higher than the May reading of 55.9%. The New Export Orders Index reading of 50.7% is down 2.2 percentage points compared to May’s figure of 52.9%. The Imports Index climbed into expansion territory, up two percentage points to 50.7% from 48.7% in May.

“All of the six biggest manufacturing industries — computer and electronic products; machinery; transportation equipment; petroleum and coal products; food, beverage and tobacco products; and chemical products — registered moderate-to-strong growth in June. Manufacturing performed well for the 25th straight month. There are signs of new order rate softening — cited in 17% of general comments, compared to 10 % in May — but the root cause is difficult to determine: (1) demand reduction, (2) adjustment for excessive lead times, causing order rate adjustments or (3) a combination of both. Employment activity remain strongly positive in spite of the uncertainty with new order rates.”

Fifteen manufacturing industries reported growth in June, including machinery, electrical equipment and transportation equipment. Meanwhile, three industries reported contracting in June: paper products, wood products and furniture and related products.

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