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U.S. ISM Manufacturing Index (June 2024)

Andrew Hencic, Senior Economist | 416-944-5307 

Date Published: July 2, 2024

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Manufacturing Index little changed in June despite broadening slowdown

  • The ISM Manufacturing Index was little change in June, dipping to 48.5 from 48.7 in May, falling short of expectations for a 49.1 print. The contraction broadened further, with now 62% of manufacturing GDP shrinking, up from 55% in May, and 34% in April.
  • Demand continued to slow as new orders index remained below the 50 cut-off for growth, new export orders flipped back to contraction, and backlogs shrank at a faster pace.
  • Output conditions worsened as both the employment and production indexes signaled a return to contraction from slight growth in May.
  • On the upside, price pressures continue to fade as the prices index fell to 52.1 from 57.0. Noted in the release is that readings over 52.8 are typically associated with an increase in the Producer Price Index for Intermediate Materials.  

Key Implications

  • The manufacturing sector has been in contractionary territory for all but one month since October 2022. Tighter monetary conditions and a slowdown in consumer demand for goods continue to weigh on the sector. Downbeat sentiment is flowing through to company decisions as the ISM Instituted noted in its release that, "companies demonstrate an unwillingness to invest in capital and inventory due to current monetary policy and other conditions". 
  • The slowdown in the sector gained steam in June as the cumulative effect of months of high interest rates is taking its toll. As consumers continue to shift spending back to services and away from goods, there's little surprise that firms are hesitant to invest. For the Fed, this month's release, taken together with last week's Personal Income & Spending report, is another signal that rates are working to cool demand and price growth.  

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