U.S. manufacturing activity surges to its highest level in three years

Manufacturing activity in the U.S. surged by 2.6 percentage points in June according to new data released this morning by the Institute for Supply Management – the highest level the Institute has recorded in 3 years.

The ISM’s manufacturing index now stands at 57.8% in the sector’s tenth consecutive month of expansion.

The ISM’s Manufacturing Report on Business is a leading economic indicator based on a survey of the nation's supply executives. June’s reading is welcome news for the sector, as growth in manufacturing had decelerated in May, inching up just 0.1%.

Growth was reported in fifteen of eighteen industries reporting to the ISM, with strong readings recorded in furniture & related products; nonmetallic mineral products; paper products; machinery; electrical equipment, appliances & components; and chemical products.

Overall, the ISM manufacturing activity report for June shows sustained growth in the U.S. industrial sector, with notable gains made in new orders, employment, production and exports.

Industrial production surges

The fastest-growing category reported by the ISM was its production index, which surged 5.3% and now stands at 62.4%. A reading over 50 indicates expansion. This is the tenth consecutive month the ISM recorded growth in this category and is the highest reading since February 2017. Fourteen industries reported expansion in June, reports the ISM, with the highest growth recorded in paper products; furniture & related products; machinery; and nonmetallic mineral products.

New orders climb for 10th straight month

Manufacturers also reported an increase in new orders, which rose four percentage points to 63.5%, after climbing two percentage points in May. This is also the tenth consecutive month ISM reported an increase in the new orders category. Industries reporting the largest number of new orders included wood products; furniture & related products; machinery; and plastic & rubber products.

Hiring up

Growth in the nation’s industrial workforce was in keeping with the general rise in activity, with the ISM’s employment index rising 3.7% to its current level of 58.9%. This follows a softer 1.5% increase in jobs recorded in May. Interestingly, textile mills topped the list of the 14 out of 18 industries that reported an uptick in jobs. This was followed by furniture & related products; paper products; and electrical equipment, appliances & components.

New exports rise

The ISM also recorded a robust rise in new exports, which climbed 2% to 59.5 in June, after inching down a couple percentage points in May. This is the sixteenth consecutive month exports in the U.S. have been in expansion territory, and were strongest in furniture & related products; transportation equipment; fabricated metals and machinery. Imports grew at much slower rate, up a half percentage points to 53.5.

Inventories fall; prices still on the rise

The ISM’s Inventories Index dipped 2.5% to 49%, an indication of contraction in manufacturers’ inventories of raw materials, according to the ISM. Those industries reporting lower inventories included fabricated metal products; food; beverage & tobacco products; and paper products.

The ISM’s Prices Index fell 5.5%, but is still in expansion territory with a current reading of 55%. This is the 16th consecutive month manufacturers reported paying higher prices with 27% of respondents reporting paying higher prices in June; 17% paying lower prices; and 56% paying about the same.

For more information

June’s positive manufacturing activity reading by the ISM is in line with recent data compiled by IndustryNet, showing expansion in several American industrial sub-sectors.

The Manufacturing ISM® Report On Business® is based on data compiled from purchasing and supply executives nationwide.