Economic activity in the manufacturing sector contracted in June for the eighth consecutive month following a 28-month period of growth according to the Institute for Supply Management.
For the first time during this downturn, every ISM® subcategory is in contraction.
Please consider the June 2023 Manufacturing ISM® Report On Business® by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®).
The U.S. manufacturing sector contracted in June, as the Manufacturing PMI® registered 46 percent, 0.9 percentage point lower than the reading of 46.9 percent recorded in May. “This is the eighth month of contraction and continuation of a downward trend that began in June 2022. That trend is reflected in the Manufacturing PMI®’s 12-month average falling to 48.8 percent. Of the five subindexes that directly factor into the Manufacturing PMI®, none are in growth territory. Of the six biggest manufacturing industries, only one (Transportation Equipment) registered growth in June. The New Orders Index logged a 10th month in contraction territory. This month, none of the 10 subindexes were above 50 percent for the period,” says Fiore. A reading above 50 percent indicates that the manufacturing sector is generally expanding; below 50 percent indicates that it is generally contracting.
A Manufacturing PMI® above 48.7 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the June Manufacturing PMI® indicates the overall economy contracted in June for a seventh consecutive month after 30 straight months of expansion. “The past relationship between the Manufacturing PMI® and the overall economy indicates that the June reading (46 percent) corresponds to a change of minus-1 percent in real gross domestic product (GDP) on an annualized basis,” says Fiore.
Production
The Production Index registered 46.7 percent in June, 4.4 percentage points lower than the May reading of 51.1 percent, indicating a return to contraction after one month of expansion preceded by five consecutive months in contraction. “Of the top six industries, three — Transportation Equipment; Machinery; and Computer & Electronic Products — expanded in June. The index recorded its lowest reading since May 2020, when it registered 34.2 percent. With the large-scale contraction of backlogs and the absence of new orders, build rates are likely being managed down more aggressively,” says Fiore. An index above 52.2 percent, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.
Diffusion Index Comments
The ISM is a diffusion index, signaling direction not amount. For example a firm hiring 10 workers and a firm laying off 200 workers balances out.
And there is a survival bias and a weighting bias.
Divergences
- GDP vs GDI: Largest Discrepancy Between GDP and GDI in 20 Years
- Jobs vs Employment: Jobs Grow by 372,000 but Employment Shrinks by 315,000
ISM is another divergence in this strangest of strange economies. ISM is signaling a recession that isn’t here unless GDI is correct.
May company had a manufacturing slowdown in May, and maybe June. It was expected because our customer told us months ago, so we were able to spread out the work instead of taking a sudden hit and laying off people Our customer expects a pick up in Q4. We spread out the work to avoid letting go and bringing people back, which introduces lower quality products training new people and refreshing previous employees (if they decide to return).
Once upon a time I had a very similar situation.
Spread work out and kept best people.
Then customer didn’t come through in Q4 and Q1 and I damn near went broke.
This is what happens with rapidly rising int rates bouncing off decades long artifically depressed int rates.
Still not too late for Country Club GOPers to keep raising rates, crash the economy and put trump back behind the wheel…but they blinked with default and they’re better off with status quo
46.0 is a 14 year low outside of covid.
This is sort of related:
The Ardaugh group manufactures much of the Bud Light bottles.
They just closed their plant in my town (Wilson NC) due to lack of orders from Bud light, and they do not expect orders to come back.
Closing a plant is a pretty good indicator that Bud light is not expected to recover their market share from this. Closing plants is about as strong an indicator as you can get of expectations.
The plants will just move to Mexico. Modelo, a Mexican beer, is now the best selling beer in America. And Bud will just merge with someone at some point, probably Modelo.
https://www.foxbusiness.com/markets/modelo-passing-bud-light-no-1-beer-happened-sooner-than-anticipated-constellation-brands-ceo-says
Bud is already owned by AB InBev the largest beer conglomerate in the world. So Bud won’t be merging with anyone because they don’t have to.
That is because the Modelo market itself moved North.