Manufacturing slowed in June, with demand at “no growth” levels, the Institute for Supply Management said today.
The Tempe, Ariz.-based group’s manufacturing index, known as the PMI, slipped to 51.7 percent last month, according to a monthly report. That was down from 52.1 percent in May. It was also the lowest PMI since October 2016, when the PMI was also 51.7 percent.
“Right now, demand is essentially flat, no growth,” Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee, said on a conference call. “We need more new orders to expand.”
The PMI is considered a leading indicator, meaning it’s a sign of what may be ahead for the economy. The ISM report is based on a survey of 350 purchasing and supply executives. A reading above 50 percent indicates a growing manufacturing economy. Below 50 percent indicates economic contraction. The PMI has been above 50 percent for 34 straight months.
The PMI has averaged 56 percent for the past 12 months. As recently as March, the PMI stood at 55.3 percent. “I miss the days of 55,” Fiore said.
Since then, the index has declined each month. “We usually go down and come back up,” Fiore said.
The institute said 12 of 18 industries reported economic expansion. That included furniture, textiles, petroleum and coal products, miscellaneous manufacturing and machinery. Five industries reported contraction, including apparel, primary metals, transportation equipment and fabricated metal products.
Within the 18 industries, ISM classifies six as major sectors. Of that group, four reported expansion. The worst performing of the six was transportation. Within that sector, sales of light-vehicle sales are slowing and Boeing Co. has been affected by the grounding of its 737 Max aircraft following two fatal crashes.
The institute’s New Orders Index fell in June to 50 percent, dead even, down from 52.7 percent the month before. That snapped a streak of 41 consecutive months of expansion for new orders. Ten of 18 industries reported an increase in orders. Six reported a decline, including transportation equipment, machinery and fabricated metal products.
There were some bright spots in the report.
ISM’s Production Index advanced to 54.1 percent last month, up from 51.3 percent in May. Thirteen industries report output gains, with five saying production fell.
“Production remains in an expansion mode” and is capable of boosting output if demand recovers, Fiore said on the conference call.
ISM’s Employment Index improved to 54.5 percent in June, up from 53.7 percent in May. Twelve of 18 industries reported job gains, with four reported employment cuts.
Survey results indicated continuing concern about trade with “respondents not believing the issue is fully resolved,” Fiore said.
The U.S. and China are resuming trade negotiations, as the two sides try to end an ongoing trade war. The U.S. agreed to put off additional tariffs. Tariffs are a tax on imported goods. Importers pay the tariffs, the cost of which is usually passed onto customers. Tariffs are not a payment from one country to another.