The Institute for Supply Management Purchasing Managers Index (PMI) reading in June points to a faster rate of contraction in the manufacturing sector in the United States.
“Demand remains weak, production is slowing due to lack of work, and suppliers have capacity. There are signs of more employment reduction actions in the near term”, according to Timothy Fiore, chairman of the ISM.
The ISM PMI fell to 46 in June 2023, from 46.9 in May and below forecasts of 47. The reading pointed to a faster rate of contraction in the manufacturing sector since May 2020, with companies who were managing outputs report those numbers down as softness continues and optimism about the second half of 2023 weakening.
In June, the report found that declines were seen in the measurement categories of new orders (45.6 vs 42.6), production (46.7 vs 51.1), employment (48.1 vs 51.4), inventories (44 vs 45.8) and backlog of orders (38.7 vs 37.5).
Also, price pressures eased (41.8 vs 44.2) and the supplier deliveries index increased to 45.7 from 43.5, a sign manufacturing lead times improved again, the organization reported.
On the other hand, the customers’ inventories index dropped into ‘too low’ territory (46.2 vs 51.4), which ISM said is a positive sign predicting higher future production.
The Manufacturing ISM Report on Business is based on data compiled from purchasing and supply executives nationwide. A PMI reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally declining.
For each of the indicators measured (new orders, backlog of orders, new export orders, imports, production, supplier deliveries, inventories, customers’ inventories, employment, and prices), the ISM report also shows the percentage reporting for each response.