ISM: expansion gains, price pressures still high in June

The overall economy grew for the 110th straight time, the Institute for Supply Management reported Monday.

According to the ISM's monthly report on business, the ISM index increased to 60.2 in June from 58.7 in May.

Economists polled by IFR Markets predicted the index would be 58.1.

ISM

An index reading below 50 signals a slowing economy, while a level above 50 suggests expansion. A reading of 50 shows the sector was unchanged in the month.

The prices paid index decreased to 76.8 from 79.5, indicating higher raw materials prices for the 28th consecutive month. The employment index slid to 56.0 from 56.3.

The production index climbed to 62.3 from 61.5, the new orders index fell to 63.5 from 63.7; the supplier deliveries index rose to 68.2 from 62.0; the export orders index gained to 56.3 from 55.6; and the imports index climbed to 59.0 from 54.1.

The inventories index rose to 50.8 from 50.2; the customers' inventories index crept to 39.7 from 39.6; and backlog of orders declined to 60.1 from 63.5.

Respondents' comments included:

  • “Business is strong in all regions. Materials are tight. Trucking continues to be a major challenge.” (Chemical Products)
  • “Strong economic growth continues to put pressure/strain on capacity, lead time, availability and pricing across a broadening array of commodities and components.” (Computer & Electronic Products)
  • “U.S. tariff policy and lack of predictability, along with [the] threat of trade wars, [is a] causing general business instability and [is] drag on growth for investments.” (Electrical Equipment, Appliances & Components)
  • “Electronic component supply issues continue to disrupt production.” (Transportation Equipment)
  • “We export to more than 100 countries. We are preparing to shift some customer responsibilities among manufacturing plants and business units due to trade issues (for example, we’ll shift production for China market from the U.S. to our Canadian plant to avoid higher tariffs). Within our company, there is a sense of uncertainty due to potential trade wars.” (Food, Beverage & Tobacco Products)
  • “The Section 232 steel tariffs are now impacting domestic steel prices and capacity. Base steel prices have already increased 20 percent since March.” (Fabricated Metal Products)
  • “Transportation costs are going through the roof right now, which definitely impacts the decisions we’re making with regard to quantities we’re bringing in versus truckload and LTL.” (Furniture & Related Products)
  • “The economy and product demand still continue to be strong. Having trouble finding people [to fill] blue collar positions. Lead times for parts and materials are moving out, and we are seeing commodity cost pressures increases with the threat of tariffs. Additionally, suppliers are asking for more price increases.” (Machinery)
  • “The uncertainty of U.S. tariffs and the Canada/Mexico/E.U. retaliatory tariffs continues to cloud strategic planning efforts. Contingency planning (for tariffs) is consuming large amounts of manpower that could be used for more productive projects. The tariffs are improving margins in our raw material businesses; however, our businesses which are further up the supply chain are seeing significant inflation.” (Miscellaneous Manufacturing)
  • "The steel tariffs continue to drive uncertainty. Projects and services using steel have limited days that prices are good for. Trucking is tight, requiring advanced planning and increasing costs.” (Paper Products)
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Economic indicators Manufacturing industry
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