Manufacturing Sector Starting to Grow Again

by Robert Hughes
The American Institute for Economic Research

The Institute for Supply Management’s Manufacturing Purchasing Managers’ Index showed dramatic improvement, registering a 52.6 percent reading in June, up from 43.1 percent in May and the first reading above the neutral 50 threshold since February. The June result follows three months in a row in the 40s (see top chart). Overall, the report notes, “June signifies manufacturing entering an expected expansion cycle after the disruption caused by the coronavirus (COVID-19) pandemic. Comments from the panel were positive (1.3 positive comments for every one cautious comment), reversing the cautious trend which began in March.”

The composite Purchasing Managers’ Index gain of 9.5 percentage points was a month-over-month rate of change not seen since 1980 while several of the key components of the Purchasing Managers’ Index posted “gains not seen in modern times.” The New Orders Index came in at 56.4 percent, up from 31.8 percent in May, a jump of 24.1 percentage points and the first reading above 50 since January (see top chart). The New Export Orders Index came in at 47.6 percent in June, up 8.1 percentage points from a 39.5 percent result in May.

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