ISM: Manufacturing sector slips in June

Written by Brett Linton

US manufacturing activity contracted again in June, as reported in the latest release from the Institute for Supply Management (ISM). The Index has indicated contraction in the manufacturing sector for 19 of the last 20 months.

The ISM Manufacturing PMI eased to 48.5% in June, down 0.2 percentage points from May and now marking the second-lowest reading of the year. A reading above 50 indicates the manufacturing economy is growing, while a reading below 50 indicates contraction.

Despite this, ISM said the overall economy continued in expansion for the 50th month in a row through June. (The institute noted that a Manufacturing PMI above 42.5%, over a period of time, generally indicates that the overall economy is expanding.)

“Demand remains subdued, as companies demonstrate an unwillingness to invest in capital and inventory due to current monetary policy and other conditions,” said ISM Chair Timothy R. Fiore. “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.”

Of the 16 manufacturing industries tracked, ISM said half reported growth in June while the other half contracted. Primary Metals was identified as a growing industry whereas Fabricated Metal Products was reported to be in contraction.

Steel market comments

The report includes comments from survey respondents, one of which was from a fabricated metal products executive expressing slowing business conditions: “Order levels in two of our main divisions are indicating weak demand, and now we must work to reduce inventory levels.”

The full June report is available on the ISM website here.

Brett Linton

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