June 2020 Manufacturing ISM Report On Business Shows Manufacturing Sector Rebounding

By Steve Clouther

Industry Trends

The Manufacturing ISM Report On Business is published monthly by the Institute for Supply Management (ISM), the largest supply management organization in the world, as well as one of the most respected.  Economic activity in the manufacturing sector grew in June, with the overall economy notching a second month of growth after one month of contraction, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

Manufacturing grew in June, as the PMI registered 52.6 percent, 9.5 percentage points higher than the May reading of 43.1 percent.  The PMI signaled a rebuilding of economic activity in June after three months below 50 percent.  The PMI recorded its largest increase since August 1980, when it increased 10.5 percentage points.

ISM’s New Orders Index registered 56.4 percent in June, an increase of 24.6 percentage points compared to the 31.8 percent reported in May.  This indicates that new orders grew after contracting for four consecutive months and is the index’s largest month-over-month increase since records began in January 1948.

The Production Index registered 57.3 percent in June, indicating that production grew after contracting for three straight months.  The increase of 24.1 percentage points is the largest since August 1952, when the index increased 46.8 percentage points.

ISM’s Employment Index registered 42.1 percent in June, 10 percentage points higher than the May reading of 32.1 percent.  This is the index’s largest month-over-month increase since April 1961 (11 percentage points).

The delivery performance of suppliers to manufacturing organizations was slower in June, as the Supplier Deliveries Index registered 56.9 percent.  This is 11.1 percentage points lower than the 68 percent reported in May.  That percentage-point decrease is the index’s largest month-over-month decline since a drop of 11.9 percentage points in May 1979.

The Inventories Index registered 50.5 percent in June, 0.1 percentage point higher than the 50.4 percent reported for May.  Inventories expanded for a second straight month after 11 consecutive months of index contraction.

ISM’s Backlog of Orders Index registered 45.3 percent in June, a 7.1-percentage point increase compared to the 38.2 percent reported in May, indicating order backlogs contracted for the fourth consecutive month.

Of the 18 manufacturing industries, the 13 that reported growth in June — in the following order — are: Textile Mills; Wood Products; Furniture & Related Products; Printing & Related Support Activities; Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Plastics & Rubber Products; Chemical Products; Miscellaneous Manufacturing; Nonmetallic Mineral Products; Paper Products; and Electrical Equipment, Appliances & Components.  The four industries reporting contraction in June are: Transportation Equipment; Primary Metals; Fabricated Metal Products; and Machinery.

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