U.S. manufacturing expanded at its slowest rate in three years, according to the Institute for Supply Management’s June survey of manufacturing executives.
Factory activity in the U.S. now stands at 51.7%, down 0.4% from May’s reading of 52.1%, and its lowest reading since October 2016.
This means that while U.S. manufacturing is still growing, the sector is expanding at a slower rate. With any reading over 50% indicating expansion, the sector is now skirting contraction territory.
Are you an industrial company? We’d like to hear from you! We’re currently collecting insights on how manufacturers are thriving amid changing business conditions and emerging technologies. Take our survey and share your thoughts on U.S. manufacturing!
June 2019 stands as the 40th consecutive month of growth in the U.S. manufacturing sector, and the 122nd straight month of growth in the economy overall.
Says Tim Fiore, Chairman of the ISM: “Comments from the panel reflect continued expanding business strength, but at soft levels; June was the third straight month with slowing PMI expansion.Demand expansion ended, with the New Orders Index recording zero expansion, the Customers’ Inventories Index remaining at a too-low level, and the Backlog of Orders Index contracting for the second straight month.”
Tariff concerns continue to weigh heavily on U.S. manufacturers, with many from manufacturing executives commenting on and supply chain disruptions and forecasting challenges due to tariffs.
Fiore continued: “Respondents expressed concern about U.S.-China trade turbulence, potential Mexico trade actions and the global economy. Overall, sentiment this month is evenly mixed.”
Overall, the ISM reports that while production and employment expanded at a faster rate compared to May. Meanwhile, new orders fell; supplier deliveries slowed and raw materials inventories contracted.
Just twelve of eighteen industries surveyed by the ISM in June reported growth. Leading the way were furniture & related products; printing & related support activities; textile mills; nonmetallic mineral products; and food, beverage & tobacco products.
The six sectors that reported a contraction in the month of June were apparel, leather & allied products; primary metals; wood products; transportation equipment; and fabricated metal products.
New Orders Slip to Near-Contraction
The ISM’s New Orders Index sank to a near-contractionary reading of 50% in June, down 2.7% from May’s reading of 52.7%, which means the demand has hit a lull.
Says Fiore: “Customer demand did not expand for the first time since December 2015, when the index registered 49.6%.
The New Orders Index has generally led the positive readings in manufacturing activity over the past few years.
The index has remained in expansion territory for 41 consecutive months, meaning it has posted above the 50% mark that defines expansion.
Just ten of eighteen manufacturing industries reported growth in new orders, led by furniture/related products; nonmetallic mineral products; textile mills; printing/related support activities and chemical products.
Leading declines were apparel, leather & allied products and primary metals.
Manufacturing Production Ramps Up
On the brighter side, the ISM’s Production Index, which has lagged over the last few months, bumped up several percentage points. Production now stands at 54.1%, up 2.8% from May’s reading of 51.3%.
“Production expansion continued in June, and at a faster pace compared to May,” said Fiore. “The index recorded the strongest gain of all PMI sub indexes. Production output was able to improve customer-inventory positions and reduce backlog orders.”
Lower production readings agree with recent factory production readings released by the Federal Reserve, which found manufacturing output came to a virtual standstill in March. Read more: Where is U.S. Manufacturing Headed?
Employment Steps Up
The ISM’s reading on employment edged up slightly in June.
The employment index now stands at 54.5%, up 1.3%. June stands as the 33rd consecutive month of expanded employment in the U.S. manufacturing sector, though hiring has slowed significantly.
By comparison, the ISM’s employment index stood at a near-historic high of 60.5% as recently as January 2019.
Related: Resources for Finding Skilled Workers
Conclusion
The ISM’s manufacturing activity index covers a multitude of growth metrics and overall, U.S. manufacturing is still expanding, but at a much slower rate.
New orders have sunk to near contraction. Bright spots included a rebound in production and an uptick in hiring. Prices have declined and supplier deliveries continue to slow.
The Institute for Supply Management® (ISM®) is the first and largest not-for-profit professional supply management organization worldwide. Founded in 1915, ISM has over 50,000 members located in 100 countries.
Finding U.S. Industrial Suppliers
IndustryNet maintains up-to-date information on over 400,000 U.S. manufacturers and suppliers of more than 10,000 products and services. IndustryNet lists suppliers across a range of industries, producing everything from steel and aluminum to air compressors, conveyor belts and printed circuit boards.
Visitors can set up a free user accounts, build custom lists of potential suppliers, send quote requests, download company catalogs, view company photo and video libraries, and more.
IndustryNet is also a direct path for U.S manufacturers to increase their visibility among domestic industrial procurers. Learn more about our marketing solutions.
