June brought a mixed bag of economic indicators for the U.S. manufacturing sector, highlighting both challenges and pockets of resilience for the industry. Wondering what the latest data tells us? This article will cover the most up-to-date information on regional performance, manufacturing output and capacity utilization, prices, optimism, and more in our roundup of the most important manufacturing business reports released in the month of June.
Executive Summary
• U.S. manufacturing output was little changed in May, ticking up 0.1%
• Manufacturing activity in the United States sank further into contraction in May, with the composite index dragged down by waning demand, even as output and employment rebounded into expansion,
• Regional surveys remained generally subdued in May, with the exception of the New York region, which saw activity rebounding into expansion for the first time in months.
• While U.S. manufacturers shed 2,000 net jobs in May, the automotive sector hired at a rapid clip, adding more than 10,000 jobs in May.
• Unfilled manufacturing jobs in the U.S. remain elevated at 663,000 open positions.
• The Producer Price Index fell 1.6% in May—the largest decrease in nearly a year, while the ISM’s Prices Index fell 9% to a contractionary reading.
Manufacturing Output Remains Stable
After rising a full percentage point in April, U.S. manufacturing output ticked up just 0.1% in May, according to the Federal Reserve’s Industrial Production and Capacity Utilization report released June 15th. Meanwhile, the index for mining decreased 0.4%, and utilities declined 1.8%. The Fed’s overall industrial output index for May was largely unchanged over April, edging down 0.2% overall.
Meanwhile, manufacturing capacity utilization was unchanged, following a 0.7% increase in April. Capacity utilization now sits at 78.4%--0.2% above its long-run average.
For a second straight month, capacity utilization increases in manufacturing for May were led by the automotive sector and were also seen in petroleum and coal products, nonmetallic mineral products, and electric equipment and components. Decreases in capacity utilization were seen in machinery; food and beverage production; chemicals, and computer & electronic products, among others.
Most U.S. industrial sectors posted marginal losses in output in May, with the exception of aerospace & miscellaneous transportation equipment, which saw output rise 2.5%. Other sector posting notable output gains were limited to petroleum and coal products, up 1.7% and electrical equipment, appliances & components, up 1.4%.
Output declines were widespread but minor, with the sharpest decreases seen in apparel and leather, down 1.6%; nonmetallic mineral products, down 0.9% and printing & support, also down 0.9%.
U.S. Manufacturing Employment Eases Back After April Gains
Following an 11,000 job gain in April, manufacturing employment in the United States decreased by 2,000 jobs in May, according to the latest report from the U.S. Department of Labor.
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In May, durable goods manufacturing posted a 3,000-job gain. However, these gains were offset by a 5,000-job loss in non-durable goods, resulting in a 2,000 job loss for the sector overall.
Transportation equipment overwhelmingly led May’s manufacturing jobs gains, adding 10,500 jobs. Meanwhile, electrical equipment added 2,100 jobs and primary metals added 2,000. The Labor Department reported chemical manufacturing, wood products, and communications equipment also added jobs.
Job losses in the sector were widespread and were most severe in furniture manufacturing, which lost 4,000 jobs, machinery manufacturing, which lost 2,400 and fabricated metals, down 2,300.
Meanwhile, the latest JOLTS (Job Openings and Labor Turnover Survey) reported the number of unfilled job openings in the sector remains elevated at 663,000.
Additionally, the Bureau of Labor Statistics reported on June 15th, that its Producer Price Index (PPI) for final demand goods decreased 1.6% in May—the largest decrease posted since July of 2022.
Manufacturing Activity Remains Stuck in Contraction
Meanwhile, the U.S. manufacturing sector posted its seventh straight month of contraction, according to the latest survey by the Institute for Supply Management released June 1st. The ISM reports its index of manufacturing activity fell 0.2% to a reading of 46.9%.
Despite the contractionary reading recorded in May, notable improvement was seen in output and employment. Output rebounded into expansion in May, climbing 2.2% to a reading of 51.1%, while employment also rose into expansion, advancing 1.2% to a reading of 51.4%.
Demand continued to wane, however, with the New Orders Index sinking 3.1% to a reading of 42.6%.
Just four of eighteen industries surveyed by the ISM reported growth in May. These were nonmetallic mineral products; furniture & related products; transportation equipment; and fabricated metal products.
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Regional Surveys Mixed
New York Manufacturing Survey: Following several months of depressed readings, manufacturing business activity improved considerably in June in the New York region, rebounding 38 points to a reading of 6.6. New orders edged up, while shipments improved significantly, following last month’s plunge. Delivery times held steady and inventories were lower. Notably, businesses held higher expectations for improvements in conditions over the next six months.
Philly Fed Manufacturing Index: Covering Pennsylvania, New Jersey, and Delaware, manufacturing activity in the Philadelphia region continued its overall decline, according to the June Manufacturing Business Outlook Survey. The general activity and new orders indicators remained negative, although the index for shipments showed improvement and turned positive. Employment levels were relatively steady, with a slight increase in the employment index. The price indexes remained below long-run averages. While most future indicators improved, expectations for growth over the next six months remained cautious. The survey also highlighted that current general activity and new orders continued to decline, while shipments saw some positive momentum.
Richmond Fed Manufacturing Survey: Manufacturing activity in the 5th District, which includes Maryland/D.C.; North Carolina, South Carolina, Virginia and most of West Virginia, revealed a continued decline in business conditions, as indicated by the recent survey conducted by the Federal Reserve Bank of Richmond. The composite manufacturing index dropped from -10 in April to -15 in May. The shipments index and new orders index both declined, with the shipments index falling from -7 to -13 and the new orders index dropping from -20 to -29. However, the employment index showed a slight increase from 0 to 5. Firms expressed pessimism about local business conditions, as the index fell to -27, and the expectations index for future local business conditions also decreased to -16. Reductions in order backlogs and vendor lead time were reported by many firms, as these indexes remained negative.
Kansas City February Manufacturing Survey: Factory activity in the 10th district (encompassing Kansas, Colorado, Nebraska, Oklahoma, Wyoming, northern New Mexico and Western Missouri) remained stable in May, while expectations for future activity showing no significant changes. Prices for raw materials experienced a notable cooling effect, while prices for finished goods eased slightly over the past month and year. It is anticipated that prices will continue to cool in the next six months. The month-over-month composite index improved from -10 in April to -1 in May, driven by both durable and non-durable goods manufacturing, particularly in paper, primary metal, and miscellaneous durable goods. Various indexes, such as production, shipments, new orders, employment, and finished goods inventories, increased closer to their March levels after a significant decline in April.
Texas Manufacturing Outlook Survey: According to the Texas Manufacturing Outlook Survey, Texas factory activity remained flat in May. The survey’s production index slightly declined from 0.9 to -1.3, indicating minimal change in output compared to the previous month. Other measures of manufacturing activity showed declines, with the new orders index remaining in negative territory for a year and decreasing further from -9.6 to -16.1. The growth rate of orders index also fell by 10 points to -20.7, the lowest value since mid-2020. Perceptions of broader business conditions worsened, as indicated by a drop in the general business activity index to -29.1, the lowest reading in three years.
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