Manufacturing Strong in June

Tempe, Ariz. — The U.S. manufacturing sector showed surprising strength during June, reversing a May decline and making gains in most key areas, notably new orders, employment, and lower prices for raw materials and supplies, the nation's purchasing managers reported in a monthly gauge of manufacturing activity.

The Institute for Supply Management, a trade group made up of purchasing managers, the men who sign a company's checks, said its index of manufacturing activity rose 2.4 percentage points to a current level of 53.8 percent. Any reading over 50 percent indicates stepped up activity, while anything beneath that line indicates a contraction. While it's see-sawed up and down over the past 13 months, the index points to growing economic activity in the manufacturing sector for a 25th straight month.

In a particularly good piece of news, the prices that manufacturers pay for raw materials and supplies is growing at a far slower pace, the index declining markedly, 7.5 percentage points, to a level of 50.5, down from 58 in May and 73 in March. At the same time, new orders advanced 5.5 percentage points, to a reading of 57.2. In other encouraging news, customers' inventories declined 3.5 percentage points, suggesting their need to place more orders for manufactured products.

“The improved rate of growth in new orders is quite encouraging, particularly when combined with a slower rate at which prices are escalating,” said Norbert Ore of the purchasing managers' group. “These are the most positive signs that we have seen in several months, and they indicate that we may be through the 'soft patch' that many observers touted. High energy costs and the stronger dollar are still major concerns to purchasers.”