June manufacturing output remains solid, reports ISM

The June PMI, the index used by the ISM to measure growth, rose 2.9% to 57.8 (a reading of 50 or higher indicates growth), with the PMI now having grown for ten consecutive months, with the over all economy growing for 97 consecutive months. The June PMI is at its highest level going back to August 2014’s 57.9.

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Momentum in manufacturing growth continues to remain fully intact, based on data issued in the Institute for Supply Management’s (ISM) monthly Manufacturing Report on Business, which was released earlier today.

The June PMI, the index used by the ISM to measure growth, rose 2.9% to 57.8 (a reading of 50 or higher indicates growth), with the PMI now having grown for ten consecutive months, with the over all economy growing for 97 consecutive months. The June PMI is at its highest level going back to August 2014’s 57.9.

ISM said that 15 of the 18 manufacturing sectors contributing to the report grew in May, including: Furniture & Related Products; Nonmetallic Mineral Products; Paper Products; Machinery; Electrical Equipment, Appliances & Components; Chemical Products; Transportation Equipment; Computer & Electronic Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Printing & Related Support Activities; Fabricated Metal Products; Wood Products; Miscellaneous Manufacturing; and Petroleum & Coal Products. Three industries reported contraction in June compared to May: Apparel, Leather & Allied Products; Textile Mills; and Primary Metals.

Including the PMI, each of the report’s core four metrics saw growth in June.

New orders, which are often viewed as the engine driving manufacturing, headed up 4.0% to 63.5, growing for the tenth straight month, with new orders cracking the 60 mark for the first time since March 2017. The ISM said that this growth represents a “strong order intake for calendar year 2017.” And it added that 15 of 18 manufacturing sectors reported growth in new orders in June.

Production saw a sharp 5.5% increase to 62.4 while also growing for the tenth month in a row, and hitting its highest level since February 2017’s 62.9, with 14 manufacturing sectors reporting June growth.

Employment saw a 3.7% increase to 57.2 for its highest level since March 2017’s 58.9 while growing for the ninth straight month, with 14 sectors reporting growth in June.

ISM member respondents quoted in the report were largely optimistic, as the report’s numbers observed.

“Overall, demand is up 5-7 percent and expected to continue through the end of the year, at least,” a Transportation Equipment respondent said. An Electrical Equipment, Appliances & Components said that “Demand is picking up; meeting budget expectations.”

ISM Manufacturing Committee Chair Tim Fiore, was upbeat in an interview about the June data, explaining that these numbers are approaching similar numbers, and matching equal peaks, ISM has seen over the last four-to-five years.

“There are no record breakers here…but what I found amazing about this report is the consistency of the numbers and how new orders and production are up as well as employment,” he said. “Suppliers are having some problems with delivery, raw materials inventories are down, because production is consuming raw materials inventory. There is a slight increase in customer inventories but nothing to be overly concerned about. Exports were strong and imports were non-news. Backlog of orders went up, which meant there were more orders coming in that what could be produced, assuming our own lead times have not been pushed out and causing customers to place orders earlier.”

Looking at where manufacturing currently stands at the mid-point of the year and where things could end up by year-end, Fiore said that as long as new orders remain steady things should remain as they are, save for summer months factory shutdowns and vacations.

“In our semi-annual report, most people said the manufacturing economy would expand at a 4.3-4.4% rate, which is quite high and running contrary to what economists saying it would be closer to 1.6-1.9% or so,” he said. “Our annualized numbers so far are running at 4% so we need to see what July looks like, and, again, the big indicator there will be the new orders number. If it continues to be hot, then everything else will stay hot. If not, things could get interesting and that may be more related to the general economy, with more people on vacation away from their desks and not ordering as much.”


About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

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