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US manufacturing contracts for third straight month

The US Manufacturing PMI registered 48.5 percent in June, down 0.2 percentage point from the 48.7 percent recorded in May, even though the overall US economy continued in expansion for the 50th month. PHOTO:DAVI

Economic activity in the US manufacturing sector contracted in June for the third consecutive month and the 19th time in the last 20 months, say the nation’s supply executives in the latest Manufacturing ISM Report On Business®.

The report was issued by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM) Manufacturing Business Survey Committee:

“U.S. manufacturing activity continued in contraction at the close of the second quarter. Demand was weak again, output declined, and inputs stayed accommodative,” Fiore said.

The Manufacturing PMI registered 48.5 percent in June, down 0.2 percentage point from the 48.7 percent recorded in May, even though the overall US economy continued in expansion for the 50th month after one month of contraction in April 2020. (A Manufacturing PMI above 42.5 percent, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index remained in contraction territory, registering 49.3 percent, 3.9 percentage points higher than the 45.4 percent recorded in May.

Demand slowing was reflected by the (1) New Orders Index improving to marginal contraction, (2) New Export Orders Index returning to contraction, (3) Backlog of Orders Index dropping into stronger contraction territory, and (4) Customers’ Inventories Index moving into the low side of the ‘just right’ range, neutral for future production. Output (measured by the Production and Employment indexes) declined compared to May, with a combined 3.5-percentage point downward impact on the Manufacturing PMI calculation. Panelists’ companies reduced production levels month over month as head count reductions continued in June. Inputs — defined as supplier deliveries, inventories, prices and imports — continued to accommodate future demand growth. The Prices Index eased but remained in expansion (or ‘increasing’) territory; the index registered its second month of cooling increases.

“Demand remains subdued, as companies demonstrate an unwillingness to invest in capital and inventory due to current monetary policy and other conditions. Production execution was down compared to the previous month, likely causing revenue declines, putting pressure on profitability. Suppliers continue to have capacity, with lead times improving and shortages not as severe. Sixty-two percent of manufacturing gross domestic product (GDP) contracted in June, up from 55 percent in May. More concerning is the share of sector GDP registering a composite PMI calculation at or below 45 percent — a good barometer of overall manufacturing weakness — was 14 percent in June, 10 percentage points higher than the 4 percent reported in May,” added Fiore.

The June reading of the Production Index (48.5 percent) is 1.7 percentage points lower than May’s figure of 50.2 percent. The Prices Index registered 52.1 percent, down 4.9 percentage points compared to the reading of 57 percent in May. The Backlog of Orders Index registered 41.7 percent, down 0.7 percentage point compared to the 42.4 percent recorded in May. The Employment Index registered 49.3 percent, down 1.8 percentage points from May’s figure of 51.1 percent.

The Supplier Deliveries Index remained in ‘faster’ territory, registering 49.8 percent, 0.9 percentage point higher than the 48.9 percent recorded in May. (Supplier Deliveries is the only ISM Report On Business index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.) The Inventories Index registered 45.4 percent, down 2.5 percentage points compared to May’s reading of 47.9 percent.

The New Export Orders Index reading of 48.8 percent is 1.8 percentage points lower than the 50.6 percent registered in May. The Imports Index dropped into contraction territory, registering 48.5 percent, 2.6 percentage point lower than the 51.1 percent reported in May.

Reposted from https://shopmetaltech.com/industry-statistics/us-manufacturing-contracts-for-third-straight-month/

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