Manufacturing grew in June, turning a corner on the sharp COVID-19-related contraction that started in March. The Institute for Supply Management reported that its pricing manager’s index for manufacturing rose to 52.6%, up almost ten points from May’s PMI of 43.1%. June is the first time since March that the index has risen above 50%. The overall economy grew for a second month.
New orders rose to 56.4%, up 24.6 points from May’s 31.8% index. The production index shot up 24.1 points to 57.3%. The prices index rose to 51.3%, up 10.5 points since May, and the ISM’s inventories index edged up 0.1 points to 50.5%. The indexes for employment and trade rose but remained below 50%, indicating slowing rates of contraction: the employment index rose 10 points to 42.1%, new export orders rose 8.1 points to 47.6% and imports rose 7.5 points to 48.8%.
According to Timothy Fiore, CEO of the ISM, the month’s results indicate an expansion cycle beginning to counteract the short-term impact of COVID-19: “June signifies manufacturing entering an expected expansion cycle after the disruption caused by the coronavirus (COVID-19) pandemic,” he wrote. He added that the manufacturing sector was recovering month-over-month at a rate unseen since April 1980. Demand, as measured by the new orders, customer inventory, and order backlog indexes expanded, as did measures of market consumption.
“As predicted, the growth cycle has returned after three straight months of COVID-19 disruptions,” said Fiore.
Comments made by surveyed manufacturing executives displayed guarded optimism for a return to positive market conditions. “While we are seeing signs of an uptick in business activity, it is a slow recovery at this point,” said a chemical products executive. A petroleum and coal products executive noted that market demand for refined products had increased but remained below normal. “So far, so good,” said a manufacturer of primary metals who saw a “slow and steady” increase in orders.
One executive, from the food, beverage, and tobacco products sector, reported “difficulty keeping up with a significant increase in demand related to COVID-19.” The market for packaged foods has been strained by an unexpected wave of demand from consumers who are eating more of their meals at home. “Supply could be hindered if another wave of COVID-19 hits in the fall,” they said.
In March, the ISM’s manufacturing PMI fell unexpectedly to 49.1%, just below growth levels. The trend hit its nadir in April, when it fell further to 41.5%, before creeping up to 43.1% in May.
