Economic activity in the manufacturing sector grew in June, with the overall economy achieving a 25th consecutive month of growth, say the nation's supply executives in the latest Manufacturing ISM® Report On Business®.

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

“The June Manufacturing PMI® registered 53 percent, down 3.1 percentage points from the reading of 56.1 percent 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 percent. The New Orders Index reading of 49.2 percent is 5.9 percentage points lower than the 55.1 percent recorded in May. The Production Index reading of 54.9 percent is a 0.7-percentage point increase compared to May’s figure of 54.2 percent. The Prices Index registered 78.5 percent, down 3.7 percentage points compared to the May figure of 82.2 percent. The Backlog of Orders Index registered 53.2 percent, 5.5 percentage points below the May reading of 58.7 percent. The Employment Index contracted for a second straight month at 47.3 percent, 2.3 percentage points lower than the 49.6 percent recorded in May. The Supplier Deliveries Index reading of 57.3 percent is 8.4 percentage points lower than the May figure of 65.7 percent. The Inventories Index registered 56 percent, 0.1 percentage point higher than the May reading of 55.9 percent. The New Export Orders Index reading of 50.7 percent is down 2.2 percentage points compared to May’s figure of 52.9 percent. The Imports Index climbed into expansion territory, up 2 percentage points to 50.7 percent from 48.7 percent in May.”

Fiore continues, “The U.S. manufacturing sector continues to be powered — though less so in June — by demand while held back by supply chain constraints. Despite the Employment Index contracting in May and June, companies improved their progress on addressing moderate-term labor shortages at all tiers of the supply chain, according to Business Survey Committee respondents’ comments. Panelists reported lower rates of quits compared to May. Prices expansion slightly eased for a third straight month in June, but instability in global energy markets continues. Sentiment remained optimistic regarding demand, with three positive growth comments for every cautious comment. Panelists continue to note supply chain and pricing issues as their biggest concerns. Demand dropped, with the (1) New Orders Index contracting, (2) Customers’ Inventories Index remaining at a very low level, though it increased and (3) Backlog of Orders Index decreasing but still in growth territory. Consumption (measured by the Production and Employment indexes) was mixed during the period, with a combined minus-1.6-percentage point change to the Manufacturing PMI® calculation. The Employment Index contracted for the second month in a row after expanding for eight straight months (September through April), but panelists again indicated month-over-month improvement in ability to hire in June. Challenges with turnover (quits and retirements) and resulting backfilling continue to plague efforts to adequately staff organizations, but to a lesser degree compared to the previous month. Inputs — expressed as supplier deliveries, inventories and imports — continued to constrain production expansion but to a lesser extent compared to May. The Supplier Deliveries Index indicated deliveries slowed at a slower rate in June, which was supported by a slight increase in the Inventories Index. The Imports Index expanded in June after one month of contraction preceded by six consecutive months of expansion. The Prices Index increased for the 25th consecutive month, at a slower rate compared to May.

“All of the six biggest manufacturing industries — Computer & Electronic Products; Machinery; Transportation Equipment; Petroleum & Coal Products; Food, Beverage & 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 percent of general comments, compared to 10 percent 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,” says Fiore.

Fifteen manufacturing industries reported growth in June, in the following order: Apparel, Leather & Allied Products; Textile Mills; Printing & Related Support Activities; Computer & Electronic Products; Machinery; Electrical Equipment, Appliances & Components; Primary Metals; Nonmetallic Mineral Products; Plastics & Rubber Products; Transportation Equipment; Fabricated Metal Products; Miscellaneous Manufacturing; Petroleum & Coal Products; Food, Beverage & Tobacco Products; and Chemical Products. The three industries reporting contraction in June compared to May are: Paper Products; Wood Products; and Furniture & Related Products.