The Institute for Supply Management index—a key gauge of U.S. factory activity—dropped to 51.7 in June, from 52.1 a month earlier, pulled lower primarily by economic uncertainty over trade issues. The index posted its third straight monthly decline and the weakest level since October 2016.
The ISM’s measure of new orders fell to 50, the lowest since December 2015, from 52.7 in May. Prices paid for materials dropped to 47.9, the lowest since February 2016, from 53.2. The decline in materials prices partly reflects a recent drop in the price of oil—which is now trading around $60 a barrel—and underscores a lack of inflationary pressure in the economy.
The ISM index has continued to cool over the past year as tariffs have forced domestic producers to examine alternative supply chains and delay their spending decisions due to continued uncertainty over trade policy.
The data are consistent with other reports showing widespread weakness in manufacturing from Europe to Asia. While a trade cease-fire between the United States and China announced during the past weekend’s Group of 20 meetings could help to stabilize industry, a sluggish global economy will continue to weigh on producers.
Other issues creating headwinds for American manufacturers include a strong dollar, which has made domestic goods less competitive abroad, and a stall in some U.S. factory orders as aircraft giant Boeing continues to struggle with investigations related to design problems in its 737 Max aircraft.