U.S. Manufacturing Activity Rockets Back in Fastest Expansion Since 1980

U.S. manufacturing activity rebounded into expansion territory in June as more facilities reopened, according to the Institute for Supply Management’s monthly Report on Business.

According to the ISM, U.S. manufacturing activity shot up 9.5% in June to an expansionary level of 52.6% -- the sharpest increase recorded since 1980.

This follows a recent report from the Commerce Department, which detailed a 15% rebound in new orders for the month of May, suggesting the U.S. manufacturing recovery is securely underway.

The increase in activity was led by new orders and production, while employment remained stuck in contraction. 

Supplier deliveries are still slowing, but at a softer rate than in previous months, while prices are increasing. Notably, both imports and exports are slowing.

Said Timothy Fiore, Chairman of the ISM: “June signifies manufacturing entering an expected expansion cycle after the disruption caused by the coronavirus (COVID-19) pandemic. Comments from the panel were positive, reversing the cautious trend which began in March.”

Of eighteen industries, thirteen reported growth in June (up from six in May and only two in April).

Industries performing the best were led by textile mills; wood products; furniture & related products; printing & related support activities and apparel, leather & allied products.

Of industries posting declines, transportation equipment; primary metals; fabricated metal products and machinery saw the sharpest losses.

New Orders Soar

The ISM’s New Orders Index increased by a whopping 24.6% in June and now stands at 56.4%. Any reading over 50 indicates expansion. Comments to the ISM were filled with reports on increased orders.

“We are seeing an increase in orders as the economy starts to get rolling again,” said an executive in the primary metals industry. “Slow and steady, sales are increasing.”

Another in the plastics & rubber products industry noted “Orders have picked up and are trending toward normal production requirements [volume similar to 2019 production].

Yet another in the food processing sector spoke of “Difficulty keeping up with a significant increase in demand related to COVID-19.”

Eleven of eighteen industries registered an uptick in new orders for June, led by textile mills; plastics & rubber products; wood products; printing & related support activities and food, beverage & tobacco products.

Manufacturing Production Surges

The ISM’s Production Index skyrocketed 24.1% in June – an increase not seen since August 1952. The index now sits in expansion, measuring 57.3%.

Industries reporting growth in production include textile mills; furniture & related products; wood products and printing/related support activities. Primary metals; transportation equipment and fabricated metal products saw a decline in production.

Employment Contracting at a Slower Rate

Although the ISM’s employment index is still in contraction, registering 42.1%, the index surged 10% from May’s reading of 32.1%.

The ISM noted this is the largest monthly increase seen since April of 1961.

Industries reporting an increase in hiring stood at five: apparel, leather & allied products; nonmetallic mineral products; computer & electronic products; food, beverage & tobacco products and chemical products.

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