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ISM: Manufacturing Contracts for First Time in Nearly 3 Years

July 03, 2012, 07:44 AM
Filed Under: Economy

Economic activity in the manufacturing sector contracted in June for the first time since July 2009; however, the overall economy grew for the 37th 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™ Manufacturing Business Survey Committee. "The PMI registered 49.7 percent, a decrease of 3.8 percentage points from May's reading of 53.5 percent, indicating contraction in the manufacturing sector for the first time since July 2009, when the PMI registered 49.2 percent.
The New Orders Index dropped 12.3 percentage points in June, registering 47.8 percent and indicating contraction in new orders for the first time since April 2009, when the New Orders Index registered 46.8 percent. The Production Index registered 51 percent, and the Employment Index registered 56.6 percent. The Prices Index for raw materials decreased significantly for the second consecutive month, registering 37 percent, which is 10.5 percentage points lower than the 47.5 percent reported in May. Comments from the panel range from continued optimism to concern that demand may be softening due to uncertainties in the economies in Europe and China."

Performance by Industry:

Of the 18 manufacturing industries, seven are reporting growth in June, in the following order:

  • Furniture & Related Products
  • Printing & Related Support Activities
  • Fabricated Metal Products
  • Miscellaneous Manufacturing
  • Electrical Equipment, Appliances & Components
  • Machinery
  • Primary Metals

The nine industries reporting contraction in June — listed in order — are:

  • Nonmetallic Mineral Products
  • Apparel, Leather & Allied Products
  • Paper Products
  • Plastics & Rubber Products
  • Chemical Products
  • Computer & Electronic Products
  • Petroleum & Coal Products
  • Food, Beverage & Tobacco Products
  • Transportation Equipment

What Respondents are Saying:

  •  "Business is still strong, with some nagging question whether it will be sustained." (Machinery)
  •  "The economy and general business seem to be getting better even though recent data say otherwise." (Fabricated Metal Products)
  •  "Significant raw materials price correction underway." (Plastics & Rubber Products)
  •  "Local labor market shows no signs of slowing down. Competition for technical services/skilled craft remains tight." (Petroleum & Coal Products)
  •  "Overall demand signals from sales forecast are trending down in all regions." (Computer & Electronic Products)
  •  "Although our shipments are up year over year and from prior month, we can feel some head winds, especially from Europe. We are watching our expenses very tightly and being cautious." (Apparel, Leather & Allied Products)
  •  "Business continues to exceed forecast in all markets." (Primary Metals)
  •  "Economy seems to be slowing slightly due to concerns in Europe; however, production has not changed a great deal." (Transportation Equipment)
  •  "Business has started to show signs of slowing." (Furniture & Related Products)
  •  "Slowing world economies, particularly China, are reducing 3Q and later orders and drastically dropping some raw material prices." (Chemical Products)

Read the full June Manufacturing ISM Report On Business.

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