Following a slowdown in activity in May, the U.S. manufacturing sector rebounded in June and is back on a positive growth path, according to the Institute of Supply Management (ISM).
The leading indicator, the PMI, increased 1.9 percent in June to reach a level of 50.9 percent. June’s reading reflects the resumption of growth in manufacturing following the only month of contraction so far in 2013. A PMI reading above 50 percent indicates that the manufacturing economy is generally expanding; a figure below 50 percent indicates that it is contracting.
“We are really happy to be back on track,” said Bradley J. Holcomb, chair of the Institute for Supply Management Manufacturing Business Survey Committee. “Last month there was a pause in the action and we were a little disappointed. But this month it’s a ‘good news’ report, particularly given a solid increase in new orders and a healthy 4.8 percent increase in production.”
Amidst the overall good news, there were a few disappointments: computers and electronics products were one of four industry segments that contracted in June; and manufacturing employment contracted for the first time since 2009. The employment index registered 48.7 percent, a decrease of 1.4 percentage points compared with May’s reading of 50.1 percent.
“Employment dipped below 50 for the first time since 2009, but we try not to be concerned with a one-month blip,” Holcomb said. “There was some feedback among participants that there has been an inability to find certain qualified labor: machinists in fabricated metal products, for example. On the whole, I think employment in manufacturing – looking at what has transpired this the past year – has been slow. I think there’s still a little bit of ‘wait and see’ there.”
The electronics industry has been under pressure for a while as the consumer market transitions from PCs to tablets and smartphones, and June appears to be more of the same, Holcomb said. “I think electronics will continue to be impacted as desktop PCs remain under pressure and chip makers are struggling to adjust,” he added.
The ISM also reported the new orders index for June increased by 3.1 percentage points to 51.9 percent, and the production index increased by 4.8 percentage points to 53.4 percent. The prices index registered 52.5 percent, increasing 3 percentage points from May, indicating that overall raw materials prices increased from last month.