June Data: U.S. Manufacturing Growing, But Slowing

By SBE Council at 1 July, 2022, 12:32 pm

by Raymond J. Keating -

The latest purchasing managers index (PMI) from the Institute for Supply Management indicated that manufacturing was still growing in June, but the rate of growth was slowing.

Coming in at 53 percent, the June ISM PMI showed expansion for the 25^th consecutive month. However, the June reading was down from 56.1 percent in May, and was the lowest reading since June 2020.

Timothy R. Fiore, Chair of the Institute for Supply Management Manufacturing Business Survey Committee, noted:

"The U.S. manufacturing sector continues to be powered - though less so in June - by demand while held back by supply chain constraints. Despite the Employment Index contracting in May and June, companies improved their progress on addressing moderate-term labor shortages at all tiers of the supply chain, according to Business Survey Committee respondents' comments. Panelists reported lower rates of quits compared to May. Prices expansion slightly eased for a third straight month in June, but instability in global energy markets continues."

According to the index, 15 of 18 manufacturing sectors showed growth in June.

It's worth taking note of manufacturing production in the latest industrial production report from the Federal Reserve. That report estimated that manufacturing output declined slightly in May compared to April. At the same time, however, the reading in April and May were the highest since mid-2008. At the same time, the latest levels of manufacturing production remained below the heights hit in 2007. That's a decade-and-a-half of, at best, stagnation in manufacturing output.

Source: Federal Reserve Bank of St. Louis, FRED

And as we sort through the state of manufacturing, given these data and other, it must be kept in mind that manufacturing in the U.S. overwhelmingly is about small businesses.

Manufacturing	Percent of Firms by Number of Employees
Fewer than 10 employees	59.2%
Fewer than 20 employees	74.3%
Fewer than 100 employees	93.1%
Fewer than 500 employees	98.3%

Data Source: U.S. Census Bureau, 2019 numbers latest

The economy is in the midst of rough waters, especially given inflation, with the significant threat of a recession looming large. Manufacturing has had a tough time for an extended period. The entrepreneurs, businesses and workers in the manufacturing sector, like those across the rest of the economy, need to see a pro-growth policy come to the forefront in Washington.

That means tax and regulatory relief, free trade, limited government spending and intrusions, and sound money. Arguably, such an agenda matters most to U.S. manufacturers given how heavily the sector is regulated and how important international trade - both exports and imports - is to manufacturers. Anything less than moving forward with pro-growth initiatives only contributes to our current and future economic woes.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.

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