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Economic activity in the manufacturing sector expanded in June for the 11th consecutive month, and the overall economy grew for the 14th consecutive month, according to the latest Manufacturing Report On Business from the Institute for Supply Management.
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The rate of growth in the manufacturing sector, as indicated by the PMI, slowed primarily due to lower New Order and Production indexes. June's PMI registered 56.2 percent, a decrease of 3.5 percentage points from May's reading.
"The sector appears to be solidly entrenched in the recovery," says Norbert J. Ore, chairman of the ISM Manufacturing Business Survey committee. "Comments from the respondents remain generally positive, but expectations have been that the second half of the year will not be as strong in terms of the rate of growth, and June appears to validate that forecast."
Thirteen of the 18 manufacturing industries are reporting growth in June, in the following order: Plastics & Rubber Products; Transportation Equipment; Printing & Related Support Activities; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Paper Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Furniture & Related Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; and Chemical Products. The industries reporting contraction in June are: Apparel, Leather & Allied Products; Wood Products; and Machinery.
"The June ISM report on manufacturing does show some slowing from the rapid pace of expansion achieved earlier this year, but also confirms that the general trend remains positive," said Thomas J. Duesterberg, president and CEO of the Manufacturers Alliance/MAPI. "Key subindexes such as new orders, production, employment and exports eased off in June but remain supportive of growth. A sharp cooling of prices also is a harbinger of a weaker pace of growth. Inventories are still too low, up only 3 percent from the trough experienced last year, but still 14 percent below the peak in 2008, leaving ample room for strength as they are rebuilt to more normal levels."
ISM's New Orders Index registered 58.5 percent in June, which is a decrease of 7.2 percentage points when compared to the 65.7 percent reported in May.