US manufacturing activity continued its expansion for the sixth consecutive month in June, with the Institute for Supply Management's (ISM) Purchasing Managers' Index (PMI) holding steady at 54.0. This reading matches May's figure and indicates sustained growth in the sector, as any value above 50.0 signifies expansion. This extended period of growth follows an auspicious start to the year for the manufacturing sector. Comparatively, S&P Global's flash manufacturing PMI for June also showed an increase to 55.7, the highest reading since May 2022, driven in part by companies preemptively placing orders due to anticipated shortages and price hikes related to ongoing geopolitical conflicts.
While manufacturing expanded, inflationary pressures in the sector showed signs of cooling. The Prices Paid Index, a gauge of input costs, fell to 82.1 in May from 84.5 in April. Despite this decline, input-price inflation remained elevated, with the ISM Prices Index having peaked at 84.6% in April. S&P Global's measure of prices paid by factories for inputs also retreated to 71.2 from 75.3 in May, though manufacturers continued to pass on costs to consumers, albeit at a slower pace.
However, the labor market in the manufacturing sector faced challenges. The Employment Index rose slightly to 48.6 from 46.4 in the prior month but remained below the 50.0 mark, indicating tough hiring conditions. S&P Global's measure of manufacturing employment showed a more significant decline, dropping to 47.0 in June, its lowest reading since May 2020. This indicates factory job cuts at a level not seen since 2009, excluding the pandemic era, attributed to concerns over the outlook and rising operating costs, particularly raw material prices, amid the US-Israeli war with Iran.
