The Institute for Supply Management released its monthly manufacturing Purchasing Managers Index (PMI) on July 1 reflecting June activity, which showed a third straight monthly decline.

The PMI — regarded as a reliable indicator of overall U.S. industrial economic health — fell 0.2 percentage points from May to a mark of 48.5% and indicated that demand remained subdued.

Economists polled by Reuters had forecast a 0.4-point increase to 49.1%. The June reading PMI reading indicated contraction (anything below 50.0%) for the 19th time in the past 20 months.

Of the June PMI’s 10 factoring indexes, eight moved lower during June, and nine were in contraction territory. The overall figure was most impacted by a -4.9 movement in prices, which was the only index to remain in expansion territory at 52.1%. Other top moving indexes were New Orders at +3.9 to 49.3%, Imports at -2.6 to 48.5%; and Inventories at -2.5 to 45.4%.

“Demand remains subdued, as companies demonstrate an unwillingness to invest in capital and inventory due to current monetary policy and other conditions,” ISM Manufacturing Business Survey Committee Chairman Timothy Fiore commented on the June report. “Production execution was down compared to the previous month, likely causing revenue declines, putting pressure on profitability. Suppliers continue to have capacity, with lead times improving and shortages not as severe.”

Fiore added that 62% of manufacturing GDP contracted in June, up from 55% in May. More concerning, he said, is that the share of sector GDP registering a composite PMI calculation at or below 45% — considered a good barometer of overall manufacturing weakness — was 14% in June, up 10 points from May.

The eight manufacturing industries reporting growth in June were, in order: Printing & Related Support Activities; Petroleum & Coal Products; Primary Metals; Furniture & Related Products; Paper Products; Chemical Products; Miscellaneous Manufacturing; and Nonmetallic Mineral Products. 

The nine industries reporting contraction in June were, in order: Textile Mills; Machinery; Fabricated Metal Products; Wood Products; Transportation Equipment; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; and Computer & Electronic Products.

Respondent Commentary

• Here is a sampling of PMI survey respondent commentary that ISM provided for June:
• “High volume of customer orders.” [Chemical Products]
• “Customers continue to cut orders with short notice, causing a ripple effect throughout lower-tier suppliers.” [Transportation Equipment]
• “Consumer demand and inventories are no longer stable at retail and food service establishments.” [Food, Beverage & Tobacco Products]
• “While orders are still steady, inventory from the previous month is enough to satisfy current- and near-term commitments.” [Computer & Electronic Products]
• “Customers ordering more to create buffer stocks (in case of) future shortages.” [Electrical Equipment, Appliances & Components]
• “Order levels in two of our main divisions are indicating weak demand, and now we must work to reduce inventory levels.” [Fabricated Metal Products]
• “Sales backlog is decreasing. We have furloughed a portion of our workforce as a result.” [Machinery]
• “The level of production is lower due to decreased demand for products.” [Miscellaneous Manufacturing]
• “Elevated financing costs have dampened demand for residential investment. We have reduced inventories of production components.” [Wood Products]
• “Orders have increased slightly due to seasonal restocking.” [Plastics & Rubber Products]