U.S. manufacturing activity continue to expand in June, albeit at slower pace - ISM

A report from the Institute for Supply Management (ISM) showed on Thursday the U.S. manufacturing sector’s activity expanded in June, albeit at a slower pace than in May.

The ISM's index of manufacturing activity came in at 60.6 percent last month, down 0.6 percentage point from an unrevised May reading of 61.2 percent. The June reading pointed to the growth in the manufacturing sector for the 13th straight month but at the slowest pace since December 2020.

Economists' had forecast the indicator to edge down to 61.0 percent.

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

According to the report, the New Orders Index was at 66.0 percent, dropping 1.0 percentage point from the May reading, the Employment Index came in at 49.9 percent, also falling 1.0 percentage point from the May figure and slipping into contraction territory, the Supplier Deliveries Index stood at 75.1 percent, down 3.7 percentage points from the May print and the Backlog of Orders Index registered 64.5 percent, 6.1 percentage points lower compared to the May reading. Meanwhile, the Production Index posted 60.8 percent, a gain of 2.3 percentage points compared to the May figure and the Inventories Index registered 51.1 percent, 0.3 percentage point higher than the May reading. On the price front, the Prices Index recorded 92.1 percent, up 4.1 percentage points compared to the May print.

Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee, noted that the Survey Committee members reported that their companies and suppliers continue to struggle to meet increasing rates of demand. “Record-long raw-material lead times, wide-scale shortages of critical basic materials, rising commodities prices and difficulties in transporting products are continuing to affect all segments of the manufacturing economy,” he said. “Worker absenteeism, short-term shutdowns due to parts shortages, and difficulties in filling open positions continue to be issues that limit manufacturing-growth potential. Optimistic panel sentiment remained strong, with 16 positive comments for every cautious comment.” Fiore also noted that the past relationship between the PMI and the overall economy indicated that the PMI for June (60.6 percent) corresponds to a 5-percent increase in real gross domestic product (GDP) on an annualized basis.