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US Manufacturing Sector Remains Elevated in June: ISM

H.S. Borji
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US Manufacturing Sector Remains Elevated in June: ISM

The US manufacturing sector expanded for the thirteenth consecutive month in June, as new orders, employment and production expanded at a marked pace.

The Institute for Supply Management’s gauge of national manufacturing activity for June eased slightly from 55.4 to 55.3. A median estimate of market analysts called for 55.8. The US manufacturing industry has been above the 50 mark that separates expansion from contraction for twelve consecutive months.

A reading above 50 is a general sign of expansion in manufacturing activity, whereas a reading below that level signifies contraction.

Fifteen of the 18 manufacturing industries advanced in June, led by furniture and related products, nonmetallic mineral products and food, beverage and tobacco products. The three industry reporting contraction were textile mills, chemical products and plastic and rubber products.

New orders expanded sharply in June, rising for the thirteenth consecutive month. Twelve industries reported growth in new orders in June, led by nonmetallic mineral products, wood products and furniture and related products.

Production levels expanded in 13 of 18 manufacturing sub-sectors, ISM data showed. The gains were once again led by nonmetallic mineral products, followed by printing and related support activities and furniture and related products.

Employment levels expanded at a similar rate as the previous month. The employment sub-index registered a reading of 52.8 percent, unchanged from May. Nine of the 18 manufacturing sub-sectors said they increased payroll last month. The gains were led by furniture and related products, textile mills and petroleum and coal products.

“Business volume is increasing at a good pace and consumers appear to be spending more,” said one purchasing manager from food, beverage and tobacco products.

“Seasonal business remains strong,” added another from primary metals.”

“Outlook is better. General uptick in our company’s confidence,” said one representative from the chemical products industry.

A separate report released today by Markit Group said US manufacturing activity expanded at the sharpest pace in more than four years, as output and new orders continued to rise at a marked pace.

Markit’s final US manufacturing PMI for June was 57.3.

ISM forecast the US economy to have expanded 3.6 percent annually between April and June, more than offsetting the first quarter contraction.

US gross domestic product contracted 2.9 percent annually in Q1, the sharpest drop since the first quarter of 2009. Most economists believe the slowdown was only temporary and that growth should return to normal later on in the year.

The Federal Reserve at its June policy meetings downgraded its forecast for US GDP. The Fed now says the US economy is on pace to grow between 2.1 percent and 2.3 percent this year, down from the previous estimate of nearly 3 percent.

In other economic data, US construction spending increased 0.1 percent in May, following a gain of 0.2 percent the prior month, the Commerce Department confirmed today. Economists forecast a sharper rise of 0.5 percent.

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