THE ISM (via Doug Short)
Today the Institute for Supply Management published its monthly Manufacturing Report for June. The latest headline PMI was 53.5 percent, an increase of 0.7% from the previous month and slightly above the Investing.com forecast of 53.1. This was the 30th consecutive month of expansion.
Here is the key analysis from the report:
“The June PMI® registered 53.5 percent, an increase of 0.7 percentage point over the May reading of 52.8 percent. The New Orders Index registered 56 percent, an increase of 0.2 percentage point from the reading of 55.8 percent in May. The Production Index registered 54 percent, 0.5 percentage point below the May reading of 54.5 percent. The Employment Index registered 55.5 percent, 3.8 percentage points above the May reading of 51.7 percent, reflecting growing employment levels from May at a faster rate. Inventories of raw materials registered 53 percent, an increase of 1.5 percentage points from the May reading of 51.5 percent. The Prices Index registered 49.5 percent, the same reading as in May, indicating lower raw materials prices for the eighth consecutive month. Comments from the panel indicate mostly stable to improving business conditions, with the notable exception relating to the oil and gas markets. Also noted is the negative effect on egg prices and availability due to the avian flu outbreak.”
The chart below shows the Manufacturing Composite series, which stretches back to 1948. The eleven recessions during this time frame are indicated along with the index value the month before the recession starts.
June data indicated a slower improvement in overall business conditions across the U.S. manufacturing sector, with softer output growth offsetting a slight pick-up in the pace of new business gains and job creation. The latest survey indicated that subdued export demand remained a key factor weighing down overall new order growth, as highlighted by a fall in new work from abroad for the third month running. Meanwhile, input cost inflation picked up in June, but output charge inflation moderated since the previous month.
The seasonally adjusted final Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) registered 53.6 in June, down from 54.0 in May and the lowest reading since October 2013. That said, the headline index remained above the 50.0 mark that separates expansion from contraction.
Manufacturers indicated a slowdown in production growth for the third month running during June. Reports from survey respondents suggested that subdued export sales and weaker investment spending patterns in the energy sector had weighed on output growth.
Overall volumes of new work increased at a slightly faster pace than the 16-month low seen in May. Manufacturers commented on solid demand from domestic clients and gradually improving economic conditions. Meanwhile, new export orders dropped for the third successive month, which is the longest continuous period since the second half of 2012. Lower demand from abroad was linked to the strong dollar, subdued sales to clients in the euro area and intense competition for new work.
Despite weaker output growth and only a slight acceleration in total new business gains, the latest survey highlighted the fastest increase in payroll numbers since September 2014. Manufacturers noted that ongoing company expansion plans and the launch of new products had acted as a driver of staff recruitment at their plants. Meanwhile, backlogs of work continued to accumulate in June. In some instances, survey respondents noted that difficulties in recruiting suitably skilled staff had contributed to rising volumes of work outstanding.
June data indicated an improvement in supplier performance for the first time in two years, despite a robust and accelerated expansion of manufacturing sector purchasing activity. Stocks of purchases and pre-production inventories also increased since the previous month. Meanwhile, average cost burdens rose for the second month running in June, leading to a modest increase in factory gate charges.