Manufacturing activity down 4% in June

Manufacturing sector contracts for first time since July 2009, with new orders down 12%, according to latest PMI report from the Institute for Supply Management

Economic activity in the manufacturing sector contracted for the first time in nearly three years, reflecting ongoing uncertainty about local and global economies.

Released today, the Institute for Supply Management’s Purchasing Manager’s Index registered 49.7%, a decrease of 3.8% compared to May’s 53.5% reading, and the first time it has dipped below the 50-point threshold indicating growth since July 2009.

“… Comments from [supply executives] range from continued optimism to concern that demand may be softening due to uncertainties in the economies in Europe and China,” said Bradley J. Holcomb, chairman of ISM’s Manufacturing Business Survey Committee.

New orders and inventory levels declined in June as well, while production and employment levels grew.

ISM’s New Orders Index fell 12.3 percentage points to 47.8%, indicating contraction for the first time since April 2009, when the New Orders Index registered 46.8%.  Inventory levels fell 2 percentage points to 44%, marking the third straight month of inventory declines.

Production and employment levels remained above the 50-point mark, although both are growing slower than they did in May. Production levels slipped nearly 5 percentage points to 51%, while employment levels declined slightly, to 56.6% compared to May’s 56.9%.

Raw materials prices fell for the second straight month, declining nearly 11 points to 37%.

This week’s PMI news comes on the heels of declines in the Midwest Manufacturing Index for May. Released by the Federal Reserve Bank of Chicago last week, the index dipped 1% to a seasonally adjusted 93.4, its second decline in three months after gaining 2.5% in April.

The decline was driven by a nearly 3% drop in auto production compared with April, the Fed reported.

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