US manufacturing activity slowest in 2 years: ISM

A measure of US manufacturing activity slowed in June to its lowest level in two years, amid easing demand, tight labor markets and supply chain constraints.

The Institute for Supply Management's (ISM) manufacturing purchasing managers' index (PMI) fell to 53 in June from 56.1 in May, reflecting solid but slowing growth.

The report is another sign the post-Covid-19 expansion is weakening quickly in the face of snarled supply chains and spiking energy and food prices, partly unleashed by the Ukraine war. The Federal Reserve's pivot from loose monetary conditions to sharp tightening is causing consumers and companies to pull back on spending while near panic selling in financial markets is contributing to the gloom.

The new orders index fell to 49.2 from 55.1 in May, while the employment index fell to 47.3 in June from 49.6 in May, both in contraction territory below the 50 breakeven level.

The production index rose to 54.9 in June from 54.2 in May, signaling accelerating production. Levels above 50 signal growth.

"The US manufacturing sector continues to be powered — though less so in June — by demand while held back by supply chain constraints," ISM said.

The prices index registered 78.5, down from 82.2pc the prior month, while the orders backlog fell to 53.2pc from 58.7pc, both showing slowing growth.

"Backlogs expanded in June at a slower rate, as output remains stable at relatively low levels and new orders have slowed due to excessive lead times and historically high prices," ISM said. "Employment levels, driven primarily by turnover, remain the top issue affecting further output growth."

The supplier deliveries index reading of 57.3pc was down from 65.7pc, showing slowing deliveries amid steady inventory index growth at 56.

The customers inventories index, which as been at historically low levels for 23 straight months, rose by 2.5 points to 35.2 in June, which ISM called "a positive for future production growth."

The new export orders index, at 50.7, was down from 52.9, showing slowing export orders. The imports index climbed by 2 points to 50.7pc.

By Robert Willis