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The ISM Manufacturing Index dipped to 51.7 in June, down from 52.1 in May. The June reading is still positive, but the index has been inching closer to...

June 2019 ISM Manufacturing Index, May Construction Spending

July 1, 2019
By Robert A. Dye, Ph.D., Daniel Sanabria

U.S. Manufacturing is Losing Momentum as Expansion Sets New Record

•    The ISM Manufacturing Index for June fell to a still-positive 51.7 percent.
•    Construction Spending for May decreased by 0.8 percent. 

The ISM Manufacturing Index dipped to 51.7 in June, down from 52.1 in May. The June reading is still positive, but the index has been inching closer to the 50.0 break-even line after peaking at a strong 60.8 last August. We expect the index to dip below 50 soon. Even with the manufacturing sector losing momentum, the U.S. economy set a new record as the expansion entered its 121st month today. The experience of the 1990s shows that the overall U.S. economy can keep expanding even as the manufacturing sector contracts, with an ISM MF Index reading a few points below 50.

Four out of ten sub-indexes for the ISM MF Index were positive in June, including production and employment. New orders fell to neutral at 50.0 for the month. The imports sub-index was also neutral. Inventories, customers’ inventories, prices and backlog of orders were all in contraction. Twelve of eighteen industries reported expansion for the month. The five industries reporting contraction were apparel, primary metals, wood products, transportation equipment and fabricated metals. Anecdotal comments featured concern about trade tariffs for many industries. Boeing’s problems with the 737 Max are weighing on the transportation sector. Bad weather this spring has impacted agricultural-related industries and wood products.

The total value of construction put in place in May fell by 0.8 percent as all three major categories declined. Construction spending has been flat over the last 12 months, weighed down by a falling trend in the value of private residential construction. In May, private residential construction fell by 0.6 percent, with weaker single-family home construction. Private non-residential construction dropped by 0.9 percent. Public construction dipped by 0.9 percent in May.

Market Reaction: U.S. equity markets opened with gains on positive trade news. The yield on 10-Year Treasury bonds is up to 2.01 percent. NYMEX crude oil is up to $59.63/barrel. Natural gas futures are down to $2.23/mmbtu.

For a PDF version of this report, please click here: June 2019 ISM Manufacturing Index, May Construction Spending

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