In the latest Manufacturing ISM Report On Business, released on July 1, the manufacturing sector contracted in June for the fourth consecutive month, following a two-month expansion preceded by 26 straight months of contraction.
The Manufacturing PMI registered 49% in June, a 0.5-percentage point increase compared to the 48.5% recorded in May.
The overall economy continued in expansion for the 62nd month after one month of contraction in April 2020.
“The Supplier Deliveries Index indicated slower deliveries but improved performance, indicating that the delays in clearing goods through ports of entry are largely complete,” said Susan Spence, Chair of the ISM Business Survey Committee. “Tariffs-induced prices growth accelerated, while the Imports Index remained in contraction but regained the ground it lost the previous month.
Index information is as follows:
Inventories Index registered 49.2% up 2.5 percentage points compared to May's reading of 46.7%.
New Export Orders Index reading of 46.3% is 6.2 percentage points higher than the reading of 40.1% registered in May.
Imports Index gained back its loss from the previous month, registering 47.4%, 7.5 percentage points higher than May's reading of 39.9%.
New Orders Index contracted for the fifth month in a row following a three-month period of expansion; the figure of 46.4% is 1.2 percentage points lower than the 47.6 % recorded in May.
Production Index registered 50.3%, which is 4.9 percentage points higher than May's figure of 45.4%, returning the index to expansion territory.
Prices Index registered 69.7%, up 0.3 percentage point compared to the reading of 69.4% reported in May.
Backlog of Orders Index registered 44.3%, down 2.8 percentage points compared to the 47.1% recorded in May.
Employment Index registered 4%, down 1.8 percentage points from May's figure of 46.8%.
What Respondents are Saying
- "Business has notably slowed in last four to six weeks. Customers do not want to make commitments in the wake of massive tariff uncertainty." [Fabricated Metal Products]
- "Middle East unrest as well as unstable long-term tariff positions continue to impact second- and third-tier sources, which is applying pressure to material costs. Costs are up 6 percent to 10 percent over budgeted inflation — and the forecast accounted for the volatility expected with the current administration." [Wood Products]
- "The biopharmaceutical space is starting to see more pronounced headwinds: Stock prices have significantly eroded, companies are facing hiring freezes, and so on." [Chemical Products]
- "The tariff mess has utterly stopped sales globally and domestically. Everyone is on pause. Orders have collapsed." [Machinery]
- "Tariff volatility has impacted machinery, steel and specialized components. Also, potential shortages of skilled labor for construction, maintenance and installation." [Food, Beverage & Tobacco Products]
- "Tariffs continue to cause confusion and uncertainty for long-term procurement decisions. The situation remains too volatile to firmly put such plans into place." [Computer & Electronic Products]
- "Tariffs continue to impact material pricing." [Petroleum & Coal Products]
- "Tariffs, chaos, sluggish economy, rising prices, Ukraine, Iran, geopolitical unrest around the world — all make for a landscape that is hellacious, and fatigue is setting in due to dealing with these issues across the spectrum. Unfortunately, this is just the beginning unless something drastically changes, but the supply chain implications will grow — depots will not be stocked, less material will be available, and it will take years for domestic production to handle the needs (if companies even want to)." [Primary Metals]
- "The geopolitical environment remains volatile: (1) ongoing shifts in U.S. tariff policy make it difficult to plan, (2) emerging conflicts in the Middle East could pose long-term commodity risks and (3) China measures on rare earth materials are causing challenges. Overall outlook for our company is positive; it's just extremely hard to make near-term supply plans/strategies or budgets." [Miscellaneous Manufacturing]
- "The word that best describes the current market outlook is 'uncertainty.' The erratic trade policy with on-again/off-again tariffs has led to price uncertainty for customers, who appear to be prepared to hold off large capital purchases until stability returns. This has resulted in further reductions in customer demand and softening sales for the balance of 2025. Operations has planned additional weeks of downtime at multiple plants to accommodate reduced orders. Next year's forecast is not any better at this point. Additionally, most electric vehicle (EV) projects have been delayed or canceled, resulting in a significant amount of unutilized capital investment. EV technology launches for 2026-28 have been delayed past 2030." [Transportation Equipment]
