Manufacturing slowed in June to some of its lowest levels this year

More companies resorted to layoffs last month as soft demand pushed manufacturers to cut costs.

The U.S. manufacturing industry sank to new lows last month, as companies continued to struggle with soft demand.

ISM’s Purchasing Managers’ Index registered a 12-month low of 46% in June, as anxieties grow that the U.S. is headed for a recession later this year. The reading was down from 46.9% in May. A reading below 50.0% indicates an industry in economic contraction.

The .9 percentage point dip was due in large part to a sizable drop in production levels as demand eased and companies lost confidence in a rebound in the second half of the year, said the chair of the Institute for Supply Management’s Manufacturing Business Survey Committee.

“The U.S. manufacturing sector shrank again, with the Manufacturing PMI losing ground compared to the previous month, indicating a faster rate of contraction,” ISM said in a statement. “The June composite index reading reflects companies continuing to manage outputs down as softness continues and optimism about the second half of 2023 weakens.”

A month after warning that without a turnaround companies could face layoffs, ISM also noted that manufacturers have started trimming staff.

“Demand remains weak, production is slowing due to lack of work, and suppliers have the capacity,” ISM said. “There are signs of more employment reduction actions in the near term.”

The second national indices for the manufacturing sector — the S&P Global US Manufacturing PMI — showed a slightly better picture with a reading of 46.3, down from 48.4 in May.

But the change signified the index’s sharpest month-to-month decline of the year, driven by a steep decline in new orders. Customers continue to pull back on orders amid high inflation and interest rates, according to the report.

“The health of the US manufacturing sector took a sharp turn for the worse in June, adding to concerns over the economy potentially slipping into recession in the second half of the year,” the chief business economist at S&P Global Market Intelligence, said in a statement.

“Leading the darkening picture was a severe drop in demand for goods, with new orders slumping at a rate among the steepest since the global financial crisis of 2009.”

ISM survey respondents noted in their comments that some customers have been less inclined to purchase far in advance, with hopes of an economic bounceback in the second half of the year now dim.

Only four of 15 manufacturing sectors reported growth in June, according to ISM: printing & related support activities; nonmetallic mineral products; primary metals; and transportation equipment.

Source: Manufacturing Drive

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