US factory activity contracted slightly for a third straight month in June, while a measure of prices fell by the most in more than a year.
The Institute for Supply Management’s manufacturing gauge was little changed at 48.5 compared with 48.7 a month earlier, data out Monday showed. The gauge remains modestly below the reading of 50 that separates contraction and expansion.
The group’s measure of prices paid for materials fell 4.9 points, the most since May 2023. At 52.1, the index shows the slowest growth in costs this year.
While the overall manufacturing gauge still shows shrinking activity, one positive sign for producers was a pickup in the ISM’s new orders gauge. The measure rebounded nearly 4 points to 49.3, indicating bookings are getting closer to stabilising.
Meanwhile, ISM’s production index slipped into contraction territory — to 48.5 from 50.2 — and factory employment shrank.
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The figures indicate US manufacturing continues to struggle for momentum due to high borrowing costs, restrained business investment in equipment and uneven consumer spending as the Federal Reserve keeps interest rates higher for longer.
“Demand remains subdued as companies demonstrate an unwillingness to invest in capital and inventory due to current monetary policy and other conditions,” Timothy Fiore, chair of the ISM’s Manufacturing Business Survey Committee, said in a statement. “Production execution was down compared to the previous month, likely causing revenue declines, putting pressure on profitability.”
Nine industries reported contracting activity in June, led by textile mills, machinery and fabricated metals. Eight indicated growth.
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Select ISM Industry Comments
- “High volume of customer orders.” — Chemical Products
- “Customers continue to cut orders with short notice, causing a ripple effect throughout lower-tier suppliers.” — Transportation Equipment
- “While orders are still steady, inventory from the previous month is enough to satisfy current- and near-term commitments.” — Computer & Electronic Products
- “Customers ordering more to create buffer stocks (in case of) future shortages.” — Electrical Equipment & Appliances
- “Order levels in two of our main divisions are indicating weak demand, and now we must work to reduce inventory levels.” — Fabricated Metals
- “Sales backlog is decreasing. We have furloughed a portion of our workforce as a result.” — Machinery
- “Elevated financing costs have dampened demand for residential investment. We have reduced inventories of production components.” — Wood Products
- “The level of production is lower due to decreased demand for products.” — Miscellaneous Manufacturing
- “Orders have increased slightly due to seasonal restocking.” — Plastics & Rubber Products
Recent reports have sent mixed signals about manufacturing. Figures last week showed orders placed with US factories for business equipment unexpectedly declined in May, while separate data showed a broad pickup in factory output.
