June Manufacturing ISM; PMI at 53.5%

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Economic activity in the manufacturing sector expanded in June for the 30th consecutive month, and the overall economy grew for the 73rd consecutive month, say the nation's supply executives in the latest Manufacturing ISM® Report On Business.

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. "The June PMI registered 53.5 percent, an increase of 0.7 percentage point over the May reading of 52.8 percent. The New Orders Index registered 56 percent, an increase of 0.2 percentage point from the reading of 55.8 percent in May. The Production Index registered 54 percent, 0.5 percentage point below the May reading of 54.5 percent. The Employment Index registered 55.5 percent, 3.8 percentage points above the May reading of 51.7 percent, reflecting growing employment levels from May at a faster rate. Inventories of raw materials registered 53 percent, an increase of 1.5 percentage points from the May reading of 51.5 percent. The Prices Index registered 49.5 percent, the same reading as in May, indicating lower raw materials prices for the eighth consecutive month. Comments from the panel indicate mostly stable to improving business conditions, with the notable exception relating to the oil and gas markets. Also noted is the negative effect on egg prices and availability due to the avian flu outbreak."

Of the 18 manufacturing industries, 11 are reporting growth in June in the following order: Furniture & Related Products; Wood Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Fabricated Metal Products; Chemical Products; Paper Products; and Computer & Electronic Products. The four industries reporting contraction in June are: Petroleum & Coal Products; Primary Metals; Plastics & Rubber Products; and Machinery.

June 2015 Manufacturing Index Summaries

PMI

Manufacturing expanded in June as the PMI® registered 53.5 percent, an increase of 0.7 percentage point over the May reading of 52.8 percent, indicating growth in manufacturing for the 30th consecutive month. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI® in excess of 43.1 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the June PMI® indicates growth for the 73rd consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the 30th consecutive month. Holcomb stated, "The past relationship between the PMI® and the overall economy indicates that the average PMI® for January through June (52.6 percent) corresponds to a 3 percent increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI® for June (53.5 percent) is annualized, it corresponds to a 3.3 percent increase in real GDP annually."

New Orders

ISM®'s New Orders Index registered 56 percent in June, an increase of 0.2 percentage point when compared to the May reading of 55.8 percent, indicating growth in new orders for the 31st consecutive month. A New Orders Index above 52.1 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

The 11 industries reporting growth in new orders in June — listed in order — are: Wood Products; Furniture & Related Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Paper Products; Computer & Electronic Products; Transportation Equipment; Chemical Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; and Machinery. The four industries reporting a decrease in new orders during June are: Primary Metals; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; and Plastics & Rubber Products.

Production

ISM®'s Production Index registered 54 percent in June, which is a decrease of 0.5 percentage point when compared to the 54.5 percent reported in May, indicating growth in production for the 34th consecutive month. An index above 51.1 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures.

The 10 industries reporting growth in production during the month of June — listed in order — are: Furniture & Related Products; Nonmetallic Mineral Products; Paper Products; Miscellaneous Manufacturing; Computer & Electronic Products; Plastics & Rubber Products; Transportation Equipment; Chemical Products; Fabricated Metal Products; and Primary Metals. The three industries reporting a decrease in production during June are:  Petroleum & Coal Products; Machinery; and Food, Beverage & Tobacco Products.

Employment

ISM®'s Employment Index registered 55.5 percent in June, which is an increase of 3.8 percentage points when compared to the 51.7 percent reported in May, indicating growth in employment for the second consecutive month. An Employment Index above 50.6 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Of the 18 manufacturing industries, in June, 10 industries reported employment growth in the following order: Textile Mills; Furniture & Related Products; Fabricated Metal Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Food, Beverage & Tobacco Products; Paper Products; Chemical Products; and Primary Metals. The three industries reporting a decrease in employment in June are: Apparel, Leather & Allied Products; Machinery; and Petroleum & Coal Products.

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was faster in June as the Supplier Deliveries Index registered 48.8 percent, which is 1.9 percentage points lower than the 50.7 percent reported in May. This is the first month supplier deliveries have been faster than the previous month since October 2012 when the index registered 49.5 percent. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.

The two industries reporting slower supplier deliveries in June are: Food, Beverage & Tobacco Products; and Fabricated Metal Products. The six industries reporting faster supplier deliveries during June — listed in order — are: Computer & Electronic Products; Miscellaneous Manufacturing; Paper Products; Transportation Equipment; Machinery; and Chemical Products. Ten industries reported no change in supplier deliveries in June compared to May.

Inventories

The Inventories Index registered 53 percent in June, which is 1.5 percentage points higher than the 51.5 percent registered in May, indicating raw materials inventories are growing in June for the second consecutive month. An Inventories Index greater than 42.9 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).

The 10 industries reporting higher inventories in June — listed in order — are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Furniture & Related Products; Food, Beverage & Tobacco Products; Machinery; Computer & Electronic Products; Chemical Products; Fabricated Metal Products; and Primary Metals. The four industries reporting lower inventories in June are: Textile Mills; Nonmetallic Mineral Products; Paper Products; and Plastics & Rubber Products.

Customers' Inventories

ISM®'s Customers' Inventories Index registered 48.5 percent in June, an increase of 3 percentage points from May when customers' inventories registered 45.5 percent. June's reading indicates that customers' inventories are considered to be too low, but higher than in May.

The six manufacturing industries reporting customers' inventories as being too high during the month of June — listed in order — are: Primary Metals; Furniture & Related Products; Paper Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; and Chemical Products. The five industries reporting customers' inventories as too low during June are: Machinery; Transportation Equipment; Plastics & Rubber Products; Miscellaneous Manufacturing; and Computer & Electronic Products.

About This Report

The data presented herein is obtained from a survey of manufacturing supply managers based on information they have collected within their respective organizations. ISM® makes no representation, other than that stated within this release, regarding the individual company data collection procedures. The data should be compared to all other economic data sources when used in decision-making.