U.S. Manufacturing Sector Close to Stagnation in June

Operating conditions across the US manufacturing sector nearly stagnated in June as new orders slowed sharply and inventories were destocked, key survey data showed on Monday.

The seasonally-adjusted IHS Markit final US manufacturing purchasing managers’ index posted a reading of 50.6 in June, up slightly from 50.5 in May and ahead of the consensus estimate of analysts polled by Capital IQ for 50.1. Readings above 50 signal expansion while those below denote contraction.

Uncertainty surrounding future output growth weighed on hiring decisions among goods producers, with the rate of job creation softening to the least marked since August 2016, the survey stated. Expectations of production growth over the coming year remained “solemn” and among the weakest in the survey history in June, the report further stated. Manufacturing firms also often raised concerns surrounding tariffs and the softer trend in new orders.

Meanwhile, cost burdens faced by manufacturers continued to rise at a historically muted rate in June. Higher input prices were attributed to the ongoing effects of tariffs on raw material purchases. However, some firms stated that hikes in costs were less marked compared to earlier in the year.

In line with muted demand conditions, firms continued to deplete their stocks. Pre-production inventories fell at the quickest rate since the start of 2014 as input buying rose only fractionally, the firm stated.

“US manufacturers reported business conditions to have remained the toughest for nearly a decade in June,” Chris Williamson, chief business economist at IHS Markit, said. “The past two months have seen the lowest readings since the height of the global financial crisis in 2009”.

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