Economic activity in the manufacturing sector contracted in June for the first time since July 2009, according to the latest Institute for Supply Management business report; however, the overall economy grew for the 37th consecutive month.
The ISM uses its PMI index to gauge national manufacturing activity. A PMI reading above 50 percent indicates the manufacturing economy is generally expanding; below 50 percent indicates it is generally contracting.
“The PMI registered 49.7 percent, a decrease of 3.8 percentage points from May”s reading of 53.5 percent, indicating contraction in the manufacturing sector for the first time since July 2009, when the PMI registered 49.2 percent,” said Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management Manufacturing Business Survey Committee, which issued the report this week.
“The New Orders Index dropped 12.3 percentage points in June, registering 47.8 percent and indicating contraction in new orders for the first time since April 2009, when the New Orders Index registered 46.8 percent,” Holcomb said. “The Production Index registered 51 percent, and the Employment Index registered 56.6 percent. The Prices Index for raw materials decreased significantly for the second consecutive month, registering 37 percent, which is 10.5 percentage points lower than the 47.5 percent reported in May.”
The Manufacturing ISM Report On Business is based on data compiled from purchasing and supply executives nationwide. Holcomb said comments from the panel range from continued optimism to concern that demand may be softening due to uncertainties in the economies in Europe and China.
Performance by Industry
Of the 18 manufacturing industries, seven are reporting growth in June, in the following order: Furniture & Related Products; Printing & Related Support Activities; Fabricated Metal Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Machinery; and Primary Metals.
The nine industries reporting contraction in June—listed in order—are: Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Paper Products; Plastics & Rubber Products; Chemical Products; Computer & Electronic Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; and Transportation Equipment.
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