#United States #Tempe #Manufacturing PMI #ISM Report #Production Index

Overview of June 2025 Manufacturing ISM® Report

The latest Manufacturing ISM® Report On Business® released by the Institute for Supply Management® highlights that economic activity in the U.S. manufacturing sector has contracted for the fourth consecutive month. This comes after a two-month expansion period following a lengthy contraction lasting 26 months. The Manufacturing PMI® recorded a value of 49% in June, representing a minor improvements from May’s figure of 48.5%.

Representation of Economic Performance

Current Readings

In June, several key indices reflect an ongoing contraction in the manufacturing sector:

• - Manufacturing PMI: 49.0%
• - New Orders: 46.4%
• - Production: 50.3%
• - Employment: 45.0%
• - Supplier Deliveries: 54.2%
• - Inventories: 49.2%

Among these, the Production Index slightly crossed into expansion territory (50.3%), showing a notable increase of 4.9 percentage points from May. This shift suggests a recovery in production efforts, although generally, demand and workforce contraction still reflect caution within the industry.

Key Drivers and Trends

The report marks a critical shift in various components affecting the manufacturing environment. The New Orders Index has contracted significantly for the fifth month, indicating dwindling demand for manufactured goods. Meanwhile,

• - The Backlog of Orders Index also fell to 44.3%, illustrating a persistent reduction in backlogged orders.
• - Contrastingly, Supplier Deliveries showed some improvement in performance, likely due to a gradual easing of logistics pressures over the months.

Pricing Dynamics

The Prices Index, however, remains elevated, registering at 69.7%, which signals an ongoing increase in raw material prices for the ninth consecutive month. Key pricing surges are attributed to tariffs impacting the supply chain significantly, affecting overall manufacturing cost structures.

Sectoral Performance

Despite the overarching contraction, some sectors experienced growth:

• - Industries Expanding: Apparel, Leather & Allied Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Electrical Equipment.
• - Industries Contracting: Textile Mills, Wood Products, Paper Products, Chemical Products, Transportation Equipment, and Fabricated Metal Products.

Economic Outlook

Current sentiments from key supply executives reflect growing concerns over demand volatility, caused by factors such as ongoing tariff discussions and increasing material costs. Many expressed caution in making commitments, with customers hesitant to place orders amid economic uncertainties.

An extensive look at future workforce trends reveals that layoffs are the predominant trend as companies readjust amidst decreased order volumes. The Employment Index remains in contraction territory, reflecting a focus on reducing head count rather than hiring.

Conclusion

The nuances within the ISM Report reflect a complex landscape for U.S. manufacturing. While there are flashes of recovery, particularly in the Production Index, persistent challenges relating to demand, pricing pressures, and labor adjustments signal ongoing contraction risks for the sector as businesses navigate through an evolving economic environment. Analysts and stakeholders will closely monitor these indicators to assess the health and trajectory of manufacturing in the months ahead as the situation continues to unfold.