USA Manufacturing Contracts in June to 35-Month Low!

ISM: Monthly USA PMI


USA Economy The manufacturing sector not only stalled but contracted in June 2012. Even from my bearish viewpoint, this was a shock. I expected a smaller decline into stagnation, not a plunge into contraction. USA manufacturing growth dropped to a 35-month low (lowest since July 2009 at the end of the Great Recession). Before this contraction, there had been 34 consecutive monthly expansions (since August 2009). However, the USA economy continued to expand for the 37th consecutive month (since June 2009 with a reading greater than 42.6). The PMI of 49.7 is now below the overall average of 52.0 from January 2005 through June 2012.

ISM Manufacturing Index (PMI) by Month The June 2012 PMI decreased -3.8 to 49.7, the 3rd decrease in the past 5 months. The PMI reached a first post-recession peak in March 2010 at 59.3 and a higher peak in January 2011 at 59.9. The Great Recession low was 33.1 in December 2008. The post-recession low has been 49.2 in July 2009. A reading greater than 50 indicates manufacturing sector expansion and a reading greater than 42.6 indicates overall economic expansion.



Bradley Holcomb, Chair of the ISM Manufacturing Business Survey Committee said, "The PMI registered 49.7 percent, a decrease of 3.8 percentage points from May's reading of 53.5 percent, indicating contraction in the manufacturing sector for the first time since July 2009, when the PMI registered 49.2 percent. The New Orders Index dropped 12.3 percentage points in June, registering 47.8 percent and indicating contraction in new orders for the first time since April 2009, when the New Orders Index registered 46.8 percent. The Production Index registered 51 percent, and the Employment Index registered 56.6 percent. The Prices Index for raw materials decreased significantly for the second consecutive month, registering 37 percent, which is 10.5 percentage points lower than the 47.5 percent reported in May. Comments from the panel range from continued optimism to concern that demand may be softening due to uncertainties in the economies in Europe and China.".



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