- US manufacturing contracted for the fourth straight month, with the PMI at 49.0 in June.
- New orders and employment declined further as demand uncertainty led to job cuts.
- Input costs rose again, with tariffs and supply chain delays complicating production.
- Broader economic data signals a slowdown despite a potential Q2 GDP rebound.
Still Below 50
US manufacturing showed little sign of recovery in June, reports Reuters. The Institute for Supply Management’s (ISM) manufacturing PMI inched up to 49.0, up from May’s 48.5 but still below the critical 50 threshold that separates expansion from contraction. It marked the sector’s fourth consecutive month of decline.
The manufacturing sector, which represents about 10% of the US economy, has been hit hard by Trump-era tariffs, which have contributed to elevated input costs and supply chain snarls. Those conditions continue to make it harder for manufacturers to gauge demand and manage inventories efficiently.
Get Smarter about what matters in CRE
Stay ahead of trends in commercial real estate with CRE Daily – the free newsletter delivering everything you need to start your day in just 5-minutes
Tariffs, Demand Woes Cloud Outlook
The data suggest tariffs have distorted traditional market behaviors, pushing companies to front-load imports to avoid higher duties. This has led to uneven demand and prolonged delivery times, artificially propping up the PMI as supplier deliveries remained slow. The supplier deliveries index dropped to 54.2, down from 56.1, but still indicates slower movement of goods.
New orders—a leading indicator for future activity—fell to 46.4, marking five consecutive months of decline. At the same time, manufacturing employment slid to 45.0 as companies accelerated headcount reductions in response to weaker demand.
Cost Pressures Mount
The prices-paid index, which tracks what manufacturers pay for raw materials, increased slightly to 69.7 in June, from 69.4 in May. Rising costs paired with falling demand have created a challenging environment for producers, many of whom are clearing backlogs rather than generating new business.
Why It Matters
June data points to broader economic slowdown, with weak housing, soft spending, and rising unemployment adding to the downturn. While second-quarter GDP may benefit from a narrowing trade deficit, the fundamentals appear shaky.
Tariff-related distortions remain entrenched in key sectors, and it may take time before the noise is fully cleared from economic indicators.
What’s Next
With manufacturing still under pressure and input prices climbing, expectations for a near-term rebound are limited. Economists caution that tariff impacts and demand uncertainty may weigh on hiring and investment decisions into the second half of the year.
Without stronger demand or policy relief, manufacturers may keep struggling amid supply chain issues and global trade uncertainty.
