U.S. Manufacturing Industries Continue to Decline

A survey showed that manufacturing activity in the United States fell further in June, reaching levels not seen since the first wave of the COVID-19 pandemic. The Institute for Supply Management reported that its index for purchasing managers in the manufacturing sector dropped to 46 points last month, the lowest reading since May 2020, down from 46.9 in May. This marks the eighth consecutive month that the PMI has remained below the 50-point threshold, indicating contraction in manufacturing for the longest period since the Great Recession. According to economists' forecasts reported by Reuters, the index was expected to rise to 47 points. Government data from last week showed that manufacturing, which makes up 11.1% of the U.S. economy, contracted at an annual rate of 5.3% in the first quarter. However, there are still some strengths due to strong demand for goods such as transportation equipment, machinery, as well as electrical equipment and its parts. The manufacturing sector is struggling under the Federal Reserve's interest rate hikes of 500 basis points since March 2022, which marked the central bank’s most aggressive tightening campaign in over 40 years. Consumer spending is shifting from goods to services, which are typically purchased on credit. Companies are also managing inventories carefully in anticipation of weak demand.