The Institute for Supply Management concludes that the U.S. manufacturing sector failed to grow during June, for the 17th straight month, though overall the economy grew for the second month in a row.
The ISM’s widely tracked purchasing managers' index (PMI) rose two points to 44.8 percent for June, from 42.8 percent in May. It was the highest level for the PMI since August 2008. Within the PMI, indices declined for new orders, order backlogs, and manufacturers' and customers' inventories, but the indices for production and prices rose for May.
While a PMI of less than 50 percent is taken as an indication that the manufacturing economy is in recession, a PMI that stays above 41.2 percent over a sustained period would be taken as evidence of overall economic expansion.
"Manufacturing continues to contract at a slower rate, but the trends in the indexes are encouraging as seven of 18 industries reported growth in June," stated Norbert J. Ore, chairman of ISM's Manufacturing Business Survey Committee. "Aggressive inventory reduction continues and indications are that the de-stocking cycle is at or near the end in most industries, as the customers' inventories index remained below 50 percent for the third consecutive month."
More encouraging than the PMI is the ISM Production Index, which increased 12.1 percentage points from April through May, to 52.5 percent in June. ISM reveals that “aggressive inventory reduction continues and indications are that the de-stocking cycle is at or near the end in most industries, as the Customers' Inventories Index remained below 50 percent for the third consecutive month.”
The ISM Prices Index was unchanged from May, indicating that the supply/demand balance is improving. Overall, it concludes, a slow recovery for manufacturing is forming based on the current trends in the ISM data."
Of the 18 manufacturing sectors surveyed, only seven reported growth in June. They are: Petroleum Coal Products; Printing Related Support Activities; Wood Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Chemical Products; and Primary Metals.
The 11 industries that report contraction in June are: Apparel, Leather Allied Products; Furniture Related Products; Machinery; Computer Electronic Products; Electrical Equipment, Appliances Components; Plastics Rubber Products; Textile Mills; Transportation Equipment; Food, Beverage Tobacco Products; and Fabricated Metal Products.