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US Manufacturing Report Bleak

US manufacturing activity has slowed down for the first time in three years, fueling concerns that global economic growth has stalled. The Institute of Supply Management said its PMI, an index of manufacturing growth, fell to 49.7 percent in June from 53.5 percent in May. (A score above 50 indicates growth, and a score below 50 signals contraction.) Worse, the ISM's measure of future business also declined, indicting the slowdown will last for several months.

“The New Orders Index dropped 12.3 percentage points in June, registering 47.8 percent and indicating contraction in new orders for the first time since April 2009, when the New Orders Index registered 46.8 percent,” Bradley J. Holcomb, CPSM, CPSD, chairman of the ISM's Manufacturing Business Survey Committee, said in a press release. Comments from companies participating in the survey range from optimism to concern that demand may be softening due to economic uncertainties in Europe and China, he said.

Electronics was one of seven industries that grew in June, according to the ISM report. However, feedback from industry participants indicated demand was trending downward in all regions of the world. Production levels in the electronics and computer sectors also rose in June, but new orders followed the general trend, declining from May to June.

The report is being met with pessimism from the business press and the stock market. The Dow Jones industrial average fell immediately after the ISM released its report this morning. As of midafternoon Monday, the Dow was still in the red.

7 comments on “US Manufacturing Report Bleak

  1. Cryptoman
    July 3, 2012

     

    Chinese manufacturing indexes also slipped to their lowest levels in the last seven months. This is because the orders from abroad have dropped. Situtation in South Korea is no different. The government has reduced its export growth forecast by 3.2 points to 3.5%

    It seems the decline in the US manufacturing is not local but more global as stated in the article. This trend is apprehensive indeed.

  2. bolaji ojo
    July 3, 2012

    The decline in China manufacturing is a reflection of events in other parts of the world. The economy in Europe is fragile and with unemployment rising (11 percent currently in euro zone), demand for everything is being impacted. Made in China is consumed heavily in Western economies and as a result the weak China manufacturing situation is mirroring the situation in its export markets.

  3. Daniel
    July 4, 2012

    Barbara, you are right. According to the recent economic time news, not only in US, almost all EU countries are also having a similar lower index of manufacturing growth. The report says that, if the manufacturing index is less than 50%, it implies for a slow phase of economic growth and chances for recession.

  4. stochastic excursion
    July 4, 2012

    There is reason for concern over the West's highly leveraged monetary system.  I think it's worth noting, though, that the past decade has seen a lot of volatility.  Where we're seeing the index dip just below the threshold of being a contraction indicator, there's reason to expect the unexpected and see cash flow where there isn't any right now.

  5. ITempire
    July 21, 2012

    The difference to me is slight one and the analysts shouldnt over-react to the news. Electronics industry has always been sensitive in terms of changes and anticipation leads to severe price and sales units changes. So if orders fall for a month, it shouldnt be a major worry. A declining trend over 6 months can be a reason to be concerned about though.

  6. itguyphil
    July 22, 2012

    Interesting point. When Team USA basketball suited up for play in the Olympic practices, tons were outraged that their uniforms were “Made in China”. This led to tons of bad press and criticism for Jerry Colangelo. I guess even the cost savings there will eventually be felt in China since there will be more of an effort to avoid using their services when it comes to further nationalistic pursuits.

  7. bolaji ojo
    July 22, 2012

    Cryptoman, When the US sneezes, half the world gets a cold and the other half (minus the US itself) goes into hiding.

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