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U.S. Manufacturing Sector Contracts for First Time Since 2009

Economic activity in the U.S. manufacturing sector contracted in June for the first time since July 2009. However, the overall economy grew for the 37th consecutive month, according to the nation's supply executives in the latest Manufacturing ISM Report On Business. The report was issued this week by Bradley J. Holcomb, chair of the Institute for Supply Management Manufacturing Business Survey Committee, Tempe, Ariz., USA.

"The PMI registered 49.7%, a decrease of 3.8 percentage points from May's reading of 53.5%, indicating contraction in the manufacturing sector for the first time since July 2009, when the PMI registered 49.2%. The New Orders Index dropped 12.3 percentage points in June, registering 47.8% and indicating contraction in new orders for the first time since April 2009, when the New Orders Index registered 46.8%.

The Production Index registered 51%, and the Employment Index registered 56.6%. The Prices Index for raw materials decreased significantly for the second consecutive month, registering 37%, which is 10.5 percentage points lower than the 47.5% reported in May. Comments from the panel range from continued optimism to concern that demand may be softening due to uncertainties in the economies in Europe and China."

Of the 18 manufacturing industries, seven are reporting growth in June, in the following order: Furniture and Related Products; Printing and Related Support Activities; Fabricated Metal Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances and Components; Machinery; and Primary Metals. The nine industries reporting contraction in June (in order) are: Nonmetallic Mineral Products; Apparel, Leather and Allied Products; Paper Products; Plastics and Rubber Products; Chemical Products; Computer and Electronic Products; Petroleum and Coal Products; Food, Beverage, and Tobacco Products; and Transportation Equipment.

The seven industries reporting growth in new orders in June (in order) are: Printing and Related Support Activities; Furniture and Related Products; Miscellaneous Manufacturing; Fabricated Metal Products; Primary Metals; Electrical Equipment, Appliances and Components; and Paper Products. The 10 industries reporting a decrease in new orders during June (in order) are: Nonmetallic Mineral Products; Wood Products; Plastics and Rubber Products; Petroleum and Coal Products; Chemical Products; Food, Beverage, and Tobacco Products; Transportation Equipment; Computer and Electronic Products; Machinery; and Apparel, Leather, and Allied Products.

The eight industries reporting growth in production during the month of June (in order) are: Fabricated Metal Products; Furniture and Related Products; Miscellaneous Manufacturing; Machinery; Printing and Related Support Activities; Electrical Equipment, Appliances and Components; Transportation Equipment; and Computer and Electronic Products. The four industries reporting a decrease in production in June are: Paper Products; Chemical Products; Food, Beverage, and Tobacco Products; and Apparel, Leather, and Allied Products. Six industries reported no change in production in June compared with May.

Of the 18 manufacturing industries,11 reported growth in employment in June in the following order: Fabricated Metal Products; Furniture and Related Products; Machinery; Miscellaneous Manufacturing; Electrical Equipment, Appliances and Components; Printing and Related Support Activities; Petroleum and Coal Products; Primary Metals; Chemical Products; Food, Beverage, and Tobacco Products; and Transportation Equipment. The four industries reporting a decrease in employment in June are: Nonmetallic Mineral Products; Apparel, Leather and Allied Products; Paper Products; and Computer and Electronic Products.

The Inventories Index registered 44% in June, which is 2 percentage points lower than the 46% reported in May. This month's reading indicates that respondents are reporting that inventories are contracting, which has been the case in eight of the last nine months. An Inventories Index greater than 42.8%, over time, is generally consistent with expansion in the Bureau of Economic Analysis' (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).

The five industries reporting higher inventories in June are: Wood Products; Furniture and Related Products; Electrical Equipment, Appliances and Components; Machinery; and Food, Beverage, and Tobacco Products. The 10 industries reporting decreases in inventories in June (in order) are: Primary Metals; Nonmetallic Mineral Products; Petroleum and Coal Products; Chemical Products; Apparel, Leather and Allied Products; Paper Products; Miscellaneous Manufacturing; Computer and Electronic Products; Transportation Equipment; and Fabricated Metal Products.

More information is available online.