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Manufacturing ISM® Numbers Take an Unexpected Turn for the Worse, Expect GDP to Follow

Let's take a closer look at today's ISM® numbers to see what they mean.
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By permission from ISM®, yellow highlights by Mish

By permission from ISM®, yellow highlights by Mish

Please consider the June 2022 Manufacturing ISM® Report On Business®

By permission from ISM®. 

Key Points (My Selections)

  • The June Manufacturing PMI® registered 53 percent, down 3.1 percentage points from the reading of 56.1 percent in May. 
  • This is the lowest Manufacturing PMI® reading since June 2020, when it registered 52.4 percent. 
  • The New Orders Index reading of 49.2 percent is 5.9 percentage points lower than the 55.1 percent recorded in May. 
  • The Employment Index contracted for a second straight month at 47.3 percent, 2.3 percentage points lower than the 49.6 percent recorded in May.
  • ISM®’s New Orders Index dropped to 49.2 percent in June, a decrease of 5.9 percentage points compared to the 55.1 percent reported in May. This indicates that new order volumes contracted after growing for 24 consecutive months.
  • Two of the six largest manufacturing sectors — Petroleum & Coal Products; and Computer & Electronic Products — increased new orders at moderate-to-strong levels. 

Bloomberg Econoday Consensus 

The Bloomberg Econoday consensus was 55.0 down from 56.1. 

This was a huge miss and an unforced error by economists, which I commented on in advance. 

The important stats are new orders and backlog of orders. The former is in contraction and the latter in growth but sinking fast.

Falling orders and reduced backlogs mean reduced demand for workers, and the employment drop already reflects that.

Diffusion Indexes

Bear in mind that the ISM® components are diffusion indexes. Only the direction matters. 

For example a company laying off 100 workers is totally offset by another company hiring 2 workers. 

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Personal Income and Outlays

Bloomberg Econoday consensus, highlights and annotations by Mish.

Bloomberg Econoday consensus, highlights and annotations by Mish.

Personal Income and Spending: The Latter Much Weaker Than Expected in May

Please note Personal Income and Spending: The Latter Much Weaker Than Expected in May

Real PCE decreased 0.4 percent in May; goods decreased 1.6 percent and services increased 0.3 percent. And we had big negative revisions to April.

Why economists keep betting on strong data is a mystery.

This post originated at MishTalk.Com.

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