June Manufacturing Surveys Point to Modest Growth, Pullback in Hiring
Author(s): Josh Cable
Jul. 01, 2013
The U.S. manufacturing sector expanded modestly in June, according to the results of two purchasing-managers surveys released on Monday.
The Institute for Supply Management's purchasing-managers index registered 50.9 percent in June, up 1.9 percentage points from May.
The institute noted that June was the fifth month of expansion for the U.S. manufacturing sector so far this year.
At 51.9, Markit Group Ltd.'s purchasing-managers index pointed to modest manufacturing growth in June.
However, the financial-information-services firm noted that its June PMI indicated the slowest rate of growth since October 2012.
"Manufacturing clearly downshifted a gear between the first and second quarters, and is at risk of losing further momentum as we head into the second half of the year," said Chris Williamson, Markit's chief economist.
Of particular concern is the slowdown in new export orders. Markit's new-export-orders index tumbled from 49.8 in May to 46.3 in June.
"Domestic demand is far from lively, but it is a deteriorating export scene that is causing the real problems," Williamson said. "Export orders are being lost at the fastest rate since the height of the financial crisis in mid 2009."
Both surveys point to a slowdown in hiring.
The Institute for Supply Management's employment index registered 48.7 percent in June, down 1.4 percentage points from May. The number indicated the first downshift in hiring since September 2009, according to the institute.
"Firms are responding to the increasingly worrying order-book trend by pulling back on recruitment," Markit's Williamson said. "The employment picture from the survey is the weakest for almost three and a half years, consistent with roughly 30,000 jobs being lost per month in the manufacturing sector.
"We will need to see a swift turnaround in this employment trend if the Fed's projection of a drop in the unemployment rate to 7 percent by the end of the year is to be achieved."
Overall, the Institute for Supply Management's June survey was less grim, with the new-orders index up by 3.1 points to 51.9 percent, and the production index up by 4.8 points to 53.4 percent.
Only four manufacturing sectors reported a contraction in business, according to the institute: textile mills; transportation equipment; chemical products; and computer and electronic products.
"Comments from the [survey] panel generally indicate slow growth and improving business conditions," the institute said.