The Institute for Supply Management (ISM) said that manufacturing activity expanded robustly in June, with solid growth in demand and output. The ISM Manufacturing Purchasing Managers’ Index (PMI) rose from 58.7 in May to 60.2 in June, its highest level since February. Index readings over 50 indicate positive expansions in activity for the month on net, with data points over 60 consistent with very healthy gains. Along those lines, indices for new orders (down from 63.7 to 63.5) and production (up from 61.5 to 62.3) both exceeded 60 in June, with the new orders figure at 60 or greater for 14 straight months. The sample comments echoed that strength in the economy, even as respondents cited continuing trade worries. Yet exports (up from 55.6 to 56.3) strengthened somewhat in June.
With ever-stronger economic growth, manufacturers report accelerated input costs. Prices for raw materials (down from 79.5 to 76.8) pulled back from a seven-year high in May but remained highly elevated. Nearly 57 percent of manufacturing respondents said that their costs had risen in June, with just 3.3 percent suggesting that they were lower. Meanwhile, labor markets also continue to be quite tight, with manufacturers continuing to cite the inability to attract and retain workers as a top concern, according to the NAM’s most recent Manufacturers’ Outlook Survey. Nonetheless, in the ISM release, the employment measure (down from 56.3 to 56.0) ticked slightly lower for the month.
In other news, inventories (up from 50.2 to 50.8) grew a little stronger in June, up from being just barely neutral in May. It was the sixth consecutive month of increased inventories, which would be consistent with the healthy growth in production over that time frame. Indeed, supplier deliveries (up from 62.0 to 68.2) expanded sharply in June, up to the best reading since May 2004.
The solid manufacturing growth is consistent with the broader findings of the NAM’s Manufacturers’ Outlook Survey, in which respondents expressed record levels of optimism: 95.1 percent said they have a positive outlook for their businesses. The tax reform package that passed in December and the regulatory relief that manufacturers have seen are undoubtedly helping to drive that optimism and the continued manufacturing growth reported by ISM.
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