Manufacturing growth continues to moderate

The Purchasing Managers’ Index (PMI) fell 0.4 percentage points to 51.7% in June, and the overall economy grew for the 122nd consecutive month, according to the Institute for Supply Management (ISM). A reading above 50% indicates the manufacturing economy is expanding, and below 50% indicates it’s contracting.

The new orders index decreased 2.7 percentage points to 50% in June, from May. The production index increased by 2.8 percentage points to 54.1%. The employment index rose 0.8 percentage points to 54.5%. The supplier deliveries index decreased by 1.3 percentage points to 50.7%. The inventories index fell 1.8 percentage points to 49.1%. The prices index declined 5.3 percentage points to 47.9%.

June was the third consecutive month for slowing PMI growth as business continued to expand but at soft levels, according to ISM. Demand expansion came to an end, the new orders index showed no expansion, the customers’ inventories index was at too low of a level and the backlog of orders index fell for the second consecutive month.

New export orders were weak, and consumption, which comprises the production and employment indexes, continued to expand and led to a combined 3.6-percentage point increase. Inputs, which include supplier deliveries, inventories and imports, declined in June as a result of inventory contraction and suppliers continuing to deliver faster, leading to a combined 3.1-percentage point decrease in the supplier deliveries and inventories indexes. Imports were flat from May.

Overall, inputs show that supply chains are responding more quickly and supply managers are closely watching inventories. Prices declined for the first time since February.

Manufacturers are concerned about the trade war between the United States and China, potential trade issues with Mexico and the global economy. Manufacturers’ sentiment was mixed in June, according to ISM.