Manufacturing Expands Again in June

Economic activity in the manufacturing sector expanded in June for the fifth consecutive month, while the overall economy grew for the 68th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.  ;

Following a weak first quarter, the manufacturing sector rebounded in a strong fashion during the second quarter. In June, manufacturing expanded at its fastest pace since April 2006 when the PMI Index registered 56.9. This performance appears sustainable in the third quarter due to the current strength in New Orders and Production.  ;

The 12 industries reporting growth in June & mdash; listed in order & mdash; are: Petroleum & Coal Products; Chemical Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Computer & Electronic Products; Paper Products; Fabricated Metal Products; Primary Metals; Miscellaneous Manufacturing; Textile Mills; and Machinery.

PMI
Manufacturing growth accelerated in June as the PMI registered 56 percent, an increase of 1 percentage point when compared to May's reading of 55 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.  ;

A PMI in excess of 41.9 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates that both the overall economy and the manufacturing sector are growing.  ;

The past relationship between the PMI and the overall economy indicates that the PMI average for January through June (53 percent) corresponds to a 3.4 percent increase in real gross domestic product annually.

New Orders
ISM's New Orders Index rose to 60.3 percent in June. The index is 0.7 percentage point higher than the 59.6 percent reported in May.

Production
ISM's Production Index registered 62.9 percent in June, which is 4.6 percentage points higher than the 58.3 percent reported in May. June is the fifth consecutive month of production growth for manufacturers.

Supplier Deliveries
The delivery performance of suppliers to manufacturing organizations was faster in June ending 47 consecutive months of slower deliveries. ISM's Supplier Deliveries Index registered 49.7 percent in June, a 0.6 percentage point decrease when compared to May's reading of 50.3 percent. A reading above 50 percent indicates slower deliveries.  ;

The five industries reporting slower supplier deliveries in June are: Paper Products; Miscellaneous Manufacturing; Fabricated Metal Products; Chemical Products; and Primary Metals.

Inventories
Manufacturers'inventories registered 45.3 percent in June, a 0.8 percentage point decrease when compared to May's reading of 46.1 percent. This is the 11th consecutive month of inventory liquidation.  ;

The four industries reporting higher inventories in June are: Plastics & Rubber Products; Textile Mills; Transportation Equipment; and Furniture & Related Products.

Customers'Inventories
The ISM Customers'Inventories Index registered 47 percent in June, which is 1 percentage point lower than the 48 percent reported in May. The index indicates that respondents believe their customers have less than sufficient inventories on hand (inventories are too low) at this time. This is the fourth consecutive month in which manufacturers have reported their customers'inventories to be too low.

Prices
In June, the ISM Prices Index registered 68 percent, indicating manufacturers are paying higher prices on average when compared to May. While 42 percent of respondents reported paying higher prices and 6 percent reported paying lower prices, 52 percent of supply executives reported paying the same prices as the preceding month.