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ISM Manufacturing: Sharp Rebound to early '15 levels

July 1, 2016
Bottom Line: Manufacturing activity expanded in June for the 4th consecutive time, to its highest level since February '15. The differential between new orders and inventory levels declined -- that's typically a concern but given the gains in new orders and that inventories are still at net contractionary levels, it is probably less of a concern with this report. Employment in the manufacturing sector grew, and was slightly above the average survey level for the last twelve months. Prices paid, declined from 63.5% to 60.5% this month indicating a decline in the price of raw materials. Overall the report suggests improving manufacturing activity after contracting with the decline in commodity prices last year.

The ISM Manufacturing Index ROSE by 1.9 points in June to 53.2%, compared with market expectations for 51.3% Moreover, this was its highest reading since February '15 and the 4th consecutive expansionary reading. This indicates that manufacturing activity expanded modestly during the month.

New Orders grew modestly from 55.7% to 57.0%. Meanwhile, Export Orders grew slightly and expanded for the 5th straight month. Production grew modestly from 52.6% to 54.7%. Consequently, Order Backlogs grew for the 3rd time in the last 12 months. Inventories grew moderately from 45.0% to 48.5%. They are modestly above the average survey level for the last twelve months.

Employment grew modestly from 49.2% to 50.4%, suggesting there will be modest factory job creation in the next payroll employment report. Prices declined modestly.
Article by contingentmacro