U.S. manufacturing activity unexpectedly expands in June - ISM

A report from the Institute for Supply Management (ISM) showed on Wednesday the U.S. manufacturing sector’s activity expanded in June.

The ISM's index of manufacturing activity came in at 52.6 percent last month, up 9.5 percentage points from the May reading of 43.1 percent. The reading pointed to the biggest expansion in factory activity since April 2019.

Economists' had forecast the indicator to increase to 49.5 percent.

A reading above 50 percent indicates expansion, while a reading below 50 percent indicates contraction.

According to the report, the New Orders Index stood at 56.4 percent, an advance of 24.6 percentage points from the May reading, while the Production Index registered 57.3 percent, up 24.1 percentage points compared to the May reading, the Backlog of Orders Index posted 45.3 percent, an increase of 7.1 percentage points compared to the May reading, and the Employment Index came in at 42.1 percent, an increase of 10 percentage points from the May reading. Meanwhile, the Supplier Deliveries Index registered 56.9 percent, down 11.1 percentage points from the May figure.

Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee, noted that June signified manufacturing entering an expected expansion cycle after the disruption caused by the coronavirus (COVID-19) pandemic. “As predicted, the growth cycle has returned after three straight months of COVID-19 disruptions. Demand, consumption and inputs are reaching parity and are positioned for a demand-driven expansion cycle as we enter the second half of the year. Among the six biggest industry sectors, Food, Beverage & Tobacco Products remains the best-performing industry sector, and Computer & Electronic Products, and Chemical Products returned to respectable growth. Transportation Equipment and Fabricated Metal Products continue to contract, but at much softer levels,” said Fiore. He also added that the past relationship between the PMI and the overall economy indicates that the PMI for June (52.6 percent) corresponds to a 2.9-percent increase in real gross domestic product (GDP) on an annualized basis.