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Contraction Concerns

Manufacturing sector shrinks for eighth month in a row

Economic activity in the manufacturing sector contracted for the eighth consecutive month in June, according to a report from the Institute for Supply Management (ISM). By comparison, the overall economy has contracted seven straight months after a 30-month expansion.

ISM’s June Manufacturing PMI registered 46%, a decline of 0.9% from May's figure of 46.9%—anything below 50% signifies contraction. The New Orders Index remained in contraction territory at 45.6%, though it showed a slight improvement from the previous month. Similarly, the Production Index dropped to 46.7%, indicating a decrease in manufacturing output.

The report also highlighted a decline in employment, as the Employment Index fell to 48.1%, down 3.3 percentage points from May. Supplier deliveries have slowed, as reflected by the Supplier Deliveries Index, which reached its lowest reading since March 2009. Additionally, the Inventories Index dropped to 44%, while the New Export Orders Index and Imports Index remained in contraction territory.

Of the six major manufacturing industries, only Transportation Equipment registered growth in June. The report identified 11 industries that reported contraction, including Plastics & Rubber Products, Textile Mills, and Electrical Equipment, Appliances & Components.

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