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Economy in Brief

U.S. ISM Manufacturing Index Falls Back in June to the Lowest Level in Two Years
by Winnie Tapasanun  July 1, 2022

• 53.0 in June vs. 56.1 in May; the sixth m/m decline in PMI in eight months.

• New orders contract for the first time since May '20.

• Following 17 straight expansions, employment contract for the second successive month to the lowest level since Aug. '20.

• Production rises to a four-month high, indicating expansions for 25 straight months.

• Prices paid, while down slightly, continues to be at an elevated level.

The ISM U.S. manufacturing PMI fell to 53.0 in June from 56.1 in May and 55.4 in April, according to the Institute for Supply Management. The June reading, below the high of 63.7 in March 2021 and 60.9 in June 2021, was the lowest level since June 2020. The Action Economics Forecast Survey expected 55.0 for June.

The new orders index fell to a contraction-level 49.2 in June from 55.1 in May and 66.4 last June, registering its first contraction since May 2020's 32.3 reading. A lessened 17.8% (NSA) of respondents reported higher new orders in June vs. 28.2% in May, but a higher 17.1% reported a decline vs. May's 13.3%. The production index increased to 54.9 this month, the highest level since February, from 54.2 in May. It remained below the high of 66.4 in March 2021 and 60.9 in June 2021. The inventory index rose to 56.0 in June, the highest reading since November, from 55.9 in May and 51.3 last June.

The employment index decreased to 47.3 in June from 49.6 in May and 50.9 last June, indicating the second consecutive contraction to the deepest level since August 2020. A lessened 17.9% (NSA) of respondents reported higher employment in June vs. 21.8% in May while 18.4% reported less hiring vs. May's 22.8%. The supplier deliveries index fell to 57.3 in June, the lowest reading since July 2020, from 65.7 in May and 75.1 last June. Twenty-seven percent of respondents (NSA) reported slower product delivery speeds while 12.8% reported faster delivery speeds.

The prices paid index fell to a still-elevated-level 78.5 in June from 82.2 in May and the high of 92.1 last June. Sixty-five percent (NSA) of respondents reported higher prices in June vs. 70.2% in May while 8.3% reported price declines vs. May's 5.6%.

In other ISM series not included in the composite index, the new export orders measure was at 50.7 in June, the lowest level since July 2020, down from 52.9 in May and its recent high of 57.1 in February. The imports index rebounded to 50.7 in June from a contraction-level 48.7 in May, still down from February's high of 55.4.

The ISM figures are based on responses from over 400 manufacturing purchasing executives from 20 industries, which correspond to their contribution to GDP in 50 states. These data are diffusion indexes where a reading above 50 indicates expansion. The figures from the Institute for Supply Management can be found in Haver's USECON database; further detail is found in the SURVEYS database. The expectations number is available in Haver's AS1REPNA database.

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