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Home > Coronavirus > ISM manufacturing gauge returns to expansion with orders and production improving

ISM manufacturing gauge returns to expansion with orders and production improving

Jul. 1, 2020 by Jason Alexander

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The Institute for Supply Management’s monthly index, a closely watched measure of U.S. manufacturing activity, rose 9.5 percentage points in June to 52.6 from the May reading of 43.1, its largest jump in 40 years. Readings above 50 indicate expansion in manufacturing activity. More factories reported growth in orders and production, and the upward move in the index to a 14-month high is a significant reversal of the last two months of activity, in which the index registered decade lows.

The upturn was consistent with the performance of the RSM Manufacturing Outlook Index, which recently showed a remarkable rebound of sentiment in the U.S. manufacturing industry. However, while the worst might be behind us, the manufacturing sector may experience more damage due to pullbacks and shutdowns of business across the economy as the pandemic intensifies again. We expect this to appear in the July sentiment and survey data, thus we do urge caution in interpreting the data going forward.

The ISM’s forward-looking new orders sub-index increased 24.6 points in June to 56.4, the biggest increase on record back to 1948. The production gauge posted a similar gain, its strongest monthly advance since 1952. The employment index, meanwhile, rose 10 points from 32.1 in May to 42.1 in June, reflecting more people returning to work. It is important to note the level of employment remains well below pre-pandemic levels.

While the most recent data indicates an uptick in business activity, we expect the recovery to be slow, with the renewed upturn in COVID-19 infections across the South and West in recent weeks posing a downside risk.

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Filed Under: Coronavirus, Industrials Tagged With: coronavirus, Covid-19, ISM manufacturing index, manufacturing

About Jason Alexander

@jaalex53

Jason assists clients in the industrial products, consumer products and financial services industries and has more than 15 years of experience serving large multinational clients with particular emphasis on SEC clients, Fortune 500 and middle market companies. Jason has previously advised clients in the areas of accounting, risk management, mergers and acquisitions, process design and improvement, internal audit, regulatory compliance, internal and external financial reporting and information technology system implementation. Strong record of accomplishment of people, team and practice development across North America, Europe, Latin America, Africa and Asia.

Jason is also on the Board of Directors of the RSM US Foundation and a member of RSM’s cutting edge Industry Eminence Program, which positions participants to understand, forecast and communicate economic, business and technology trends shaping the industries RSM serves.

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