Manufacturing expands in June for 30th straight month, Arkansas sees gains

Economic activity in the manufacturing sector expanded in June for the 30th consecutive month, and the overall economy grew for the 73rd consecutive month, according to a monthly survey of the nation’s supply executives.

The report, issued Wednesday by the Institute for Supply Management Manufacturing Business Survey Committee, shows that the June purchasing managers index, or PMI, registered 53.5%, an increase of 0.7 percentage point over the May reading of 52.8%. The New Orders Index registered 56%, an increase of 0.2 points from the reading of 55.8% in May. The Production Index registered 54%, 0.5 percentage points below the May reading of 54.5%.

The Employment Index registered 55.5%, 3.8 points ahead of the May reading of 51.7%, reflecting growing employment levels from May at a faster rate. Inventories of raw materials registered 53%, an increase of 1.5 percentage points from the May reading of 51.5%. The Prices Index registered 49.5%, 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. Of the 18 manufacturing industries, 11 are reporting growth in June in the following order: Furniture & Related Products; Wood Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Fabricated Metal Products; Chemical Products; Paper Products; and Computer & Electronic Products.

The four industries reporting contraction in June are: Petroleum & Coal Products; Primary Metals; Plastics & Rubber Products; and Machinery.

Meanwhile, the Creighton University Mid-America Business Conditions Index for May, a leading economic indicator for a nine-state region stretching from North Dakota to Arkansas, climbed for June.

Indices over the past several months have pointed to positive, but slow economic growth over the next three to six months for the region.

The Business Conditions Index, which ranges between 0 and 100, rose to 53.0 from 50.4 in May. The regional index, much like the national reading, is pointing to slow growth through the third quarter of 2015.

“Much weaker business conditions for firms tied to energy are restraining the overall reading. Weaker conditions were particularly evident in Oklahoma and North Dakota, two energy-producing states. This weakness is spilling over into metal manufacturers throughout the region,” said Ernie Goss, economist and director of Creighton University’s Economic Forecasting Group in the Heider College of Business.

In Arkansas, the June index climbed to 50.4 from May’s 49.8. Components of the index from the monthly survey of supply managers were new orders at 51.6, production or sales at 51.9, delivery lead time at 50.0, inventories at 51.6, and employment at 48.2.

“Durable and nondurable producers in the state report soft but positive growth in business activity for the month,” said Goss.

Manufacturing jobs in Arkansas during May totaled 154,400, below the 154,900 in April and above the 153,800 in May 2014. Employment in the manufacturing sector fell in 2014 to levels not seen since early 1968. Peak employment in the sector was 247,300 in February 1995.

Regionally, the employment gauge remains in a range indicating slightly negative to stagnant job growth for manufacturing and value-added services firms in the region. The job gauge advanced to a weak 49.1 from May’s 48.3. This month, supply managers were asked about the hiring situation at their firms.

“There was very little change from last year,” Goss said. “Approximately four of 10 firms in both surveys expected to hire additional workers in the second half of the year. From the June 2015 survey, only 7.1% anticipate layoffs in the year ahead which is down from 10.4% in June 2014.”

The wholesale inflation index for June sank to 64.9 from May’s 69.1. Goss said the strong U.S. dollar and global economic weakness are keeping wholesale inflationary pressures at modest levels.

Looking ahead six months, economic optimism, as captured by the June business confidence index, expanded to 59.9 from May’s 58.3.

“Improvements at the national level in housing, retail sales and hiring pushed supply managers to raise their expectations about future economic conditions,” Goss said.