ISM Manufacturing Index: The Institute for Supply Management’s manufacturing index moved down 1.9% (m/m) to 46.0 for June 2023; this value is weaker than the forecast of 50. The new orders sub-index scored at 45.6. The reading pointed to a faster rate of contraction in the manufacturing sector since May 2020, with companies managing outputs down as softness continues and optimism about the second half of 2023 weakens.

The ISM manufacturing index is based on surveys of 300 purchasing managers in 17 industries. The survey is a diffusion index calculated as a percent of responses. A value of 50 is neutral, while less than 50 denotes contracting manufacturing activity and greater than 50 denotes expanding activity.

Figure 1 breaks down the composite index and sub-indexes. The backlogs sub-index was 38.7 this month, while the inventories sub-index was 44.0.

The four manufacturing industries that reported growth in June are: Printing & Related Support Activities; Nonmetallic Mineral Products; Primary Metals; and Transportation Equipment. The 11 industries reporting contraction in June, in the following order, are: Plastics & Rubber Products; Wood Products; Textile Mills; Chemical Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Paper Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; and Machinery.

“North American demand stabilizing, but European markets showing slowing in the second half of 2023 and 2024.” [Fabricated Metal Products]

At Gerdau, we closely monitor the ISM manufacturing index since it is an excellent barometer of the present strength, as well as a window on the likely short-run future, of U.S. manufacturing.