Data released on Friday showed the ISM manufacturing PMI fell more than expected in June to 53, the lowest level in two years. According to Wells Fargo analyststhe details of the report show slower activity in the manufacturing sector, but also that supply problems continue to slowly ease.
“The ISM manufacturing index fell 3.1 points to 53.0 in June. Notably, this number remains above the 50-point threshold, indicating expansion, but it is the lowest reading in nearly two years and is consistent with a slower pace of activity. There were multiple signs that supply constraints were eased, but weakness on the demand side pulled the headline index lower as new orders fell.”
“New orders tend to lead industrial production (IP) growth: SMI new orders led IP growth in the 2001 and 2007 recessions. In short, this impression of contraction in new orders is not a This is good news for activity in the sector and could herald an upcoming weakness in real production.However, a possible trade-off is the fact that manufacturers still have a record number of backlogs, which may help sustain the manufacturing activity even amid a pullback in new demand.”
“The June ISM comes on top of weaker consumer data received this week. Investment spending is starting to weaken, only adding to evidence that the US economy is slowing rapidly.”
Source: Fx Street