All Signs Point to Slowdown in the June 2022 Manufacturing ISM Report On Business

Continuing the slow decline that’s persisted since the beginning of the year, the Manufacturing ISM dropped again in June, from 56.1 to 53.0. Each month has presented another concern, and June is no different. Orders and deliveries took a significant dip, fueling concerns about an impending recession. As storm clouds gather over the economy, manufacturing is bracing for turbulence as several regressive trends gain momentum.

A closer look at the ISM Report

In contrast to earlier months this year, the June 2022 Manufacturing ISM Report On Business wasn’t a story of ebb and flow or ups and downs. Metrics across the board took a step back, confirming the predictions of many manufacturing executives.

New Order volumes headlined the report, with a plunge of nearly 6 percentage points (5.9) — a drop significant enough to officially put the metric in contraction territory. Supplier Deliveries fell an unprecedented 8.4 points as well, shedding light on the production difficulties plaguing producers right now. And while Prices also fell (3.7 points), they remain significantly inflated.

Imports ticked up 2 points, enough to put them back in expansion territory in June. Meanwhile, Exports fell 2.2 points, bringing import-export perfectly into alignment in June, with both metrics at 50.7. Employment continued to lag (down 2.3 points). Production and Inventories both wavered positively, though by less than a point apiece.

A slowdown seems inevitable

June’s grim numbers have manufacturing executives worried. Most are zeroing in on slowing order volumes and supply chain troubles that have stagnated production, and they’re warning of broader economic slowdowns to come. What those slowdowns will look like remains uncertain, and it has the entire industry on edge.

“Supply seems to be settling to some degree, but what it is settling into remains in question. Diminishing cost and (continued) limited supply in aluminum make for an interesting combination,” said one executive from the Primary Metals sector. “There are actually more questions than answers this month.”

The prevailing theory? We’re in the earliest stages of a recession, and manufacturing is the canary in the coal mine. As the first manifestations of economic contraction begin to appear in the ISM Report, they’re likely to appear elsewhere before the end of the year.

The signs all point to economic contraction

Economists are the first to point out that there’s no way to predict a recession. That said, manufacturing executives are quick to highlight that many of the signs we’re seeing today are critical precursors to one. Supply-demand imbalance, sky-high material prices, historic inflation, employment struggles, and more are all contributing factors to eventual economic contraction if not corrected.

According to the June 2022 Manufacturing ISM Report On Business, these elements all appear to be coming to a head. As the ISM flirts with contraction territory, manufacturing will inform the trajectory of the broader economy in the months to come. And, with figures trending back toward where they were during the height of the COVID-19 pandemic, it’s becoming clear that the United States is in for turbulent times ahead.

The best way to prep for an impending recession is to reinvest in your capabilities. That means ensuring the condition of your equipment. You can always count on the professionals at Global Electronic Services. Contact us for all your industrial electronic, servo motor, AC and DC motor, hydraulic, and pneumatic needs — and don’t forget to like and follow us on Facebook!
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