Manufacturing at its lowest since June 2020

Economic activity in the US manufacturing sector slowed more than expected in June to its lowest level in two years as demand and employment contracted according to the latest data.

The Institute for Supply Management’s Manufacturing Purchasing Managers’ Index fell more than 3 points last month from May to 53%, the lowest since June 2020. Analysts polled by Refinitiv had expected a June PMI rises to 54.9%.

Employees work on the assembly line at the Dakkota Integrated Systems manufacturing plant in Detroit, Michigan, U.S., Thursday, May 5, 2022. (Photographer: Jeff Kowalsky/Bloomberg via Getty Images/Getty Images)

Any reading of around 50 indicates growth in the sector, and June 2022 marked the 25th consecutive month of growth after manufacturing contracted in April and May 2020 during the throes of the coronavirus pandemic.

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Demand in the industry fell last month, with the ISM new orders index dropping 5.9 points to 49.2%. “The U.S. manufacturing sector continues to be fueled — albeit less so in June — by demand while being held back by supply chain constraints,” said Timothy Fiore, who oversaw the survey.

durable goods

A worker hangs parts on a wall for use in a Venice model roadster vehicle at the Vanderhall Motor Works Inc. manufacturing plant in Provo, Utah (Photographer: George Frey/Bloomberg via Getty Images/Getty Images)

The manufacturing employment index also fell in June to 47.3%, down for the second month in a row.

“Challenges related to turnover (resignations and retirements) and resulting replacement continue to hamper efforts to adequately staff organizations, but to a lesser extent compared to the previous month,” Fiore said.

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The slowdown in manufacturing could be further evidence that the economy is cooling, as the Federal Reserve becomes more aggressive in tightening monetary policy and raising interest rates to reduce demand in a bid to reduce the surge in inflation.

Jerome Powell fed

U.S. Federal Reserve Chairman Jerome Powell speaks during a Senate Banking, Housing, and Urban Affairs Committee hearing in Washington, DC, U.S., Wednesday, June 22, 2022. (Photographer: Ting Shen/Bloomberg via Getty Images/Getty Images)

Fed Chairman Jerome Powell said this week there was “no guarantee” that the central bank could bring inflation under control without hurting the labor market, and reiterated policymakers’ commitment to stabilize prices.

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The latest data from the ISM shows there are encouraging signs that inflation may have peaked, with the measure of prices paid by manufacturers falling from 82.2 in May to 78.5 in June.

Fiore noted, “Price expansion eased slightly for a third straight month in June, but instability in global energy markets continues.”

Reuters contributed to this report.

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