Manufacturing sector contracts for third consecutive month

A key measure of Milwaukee-area manufacturing activity once again indicated contraction in June. The seasonally adjusted Purchasing Managers Index was below 50 for now the third month in a row, according to the Marquette-ISM Report on Manufacturing.

The PMI was at 46.55 in June, down from 47.70 in May. Any number more than 50 indicates growth, while less than 50 signals contraction. Since January 2014, the index has been positive 13 of the 18 months.

In the June survey, respondents said:

  • There have not been that many major issues at this time.
  • Freight rates are increasing due to driver shortages.
  • U.S. scrap metal prices are low.

Employment, customers’ inventories and imports grew in June, while new orders, production, supplier deliveries, inventories, prices, backlog of orders and exports declined or slowed.

Regarding these indices, respondents said:

  • There are plans to institute a Kanban system (“Just-in-Time” system).
  • Customers are expected to be pulling out larger demand in the next 12 weeks.
  • There have also been talks about optimism for Quarter 4, but this optimism is not showing or reflected in the actual orders yet.
  • Both production and orders from customers have been increasing.

Seasonally adjusted blue collar employment grew from 47.8 in May to 58.8 in June, and seasonally adjusted white collar employment grew from 52.2 in May to 62.8 in June.

In the six-month outlook on business conditions, respondents indicated a downward shift in positive expectations compared with May. Approximately 43.8 percent of respondents expect positive conditions over the next six months, 37.5 percent expect conditions to remain the same and 18.8 percent of respondents expect conditions to worsen within the next six months.

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