Manufacturing Finds Stable Footing in June 2020 Manufacturing ISM® Report On Business®

As has so often been the case in 2020, the newest installment of the Manufacturing ISM® Report On Business® has headlines buzzing. After a rocky start to the year and a dismal tailspin in April, figures show manufacturing trending back in a positive direction in June. Several key metrics experienced unprecedented surges last month, propelling the index out of deep contraction territory and back over the benchmark into expansion mode. It’s not what anyone predicted, but it’s a more than welcome alternative.

The overall PMI jumped 9.5 points in June, from 43.1 to 52.6, putting a definite upward trend on May’s stabilization. The main catalysts behind the bump? Massive gains in both new orders and production, which rose 24.6 and 24.1 points, respectively. These two figures alone indicate a veritable kickstart to the manufacturing economy as the world seeks to reemerge from the shadow of COVID-19.

Several other key metrics also broke into positive stride in June, including employment (up 10 points) and prices (up 10.5 points). Order backlogs, exports, and imports also rose, with inventories staying relatively flat. Only customers’ inventories and supplier deliveries fell in June. The stark turnaround was jarring enough to push four of the ISM’s 10 metrics back into expansion territory, along with the overall PMI.

Good news comes with a word of caution

“We are seeing an increase in orders as the economy starts to get rolling again. Slow and steady, sales are increasing. So far, so good.” (Primary Metals)

“Looks like May was the bottom in terms of orders. June is stronger, and our order books are rebuilding.” (Machinery)

These key quotes from the ISM encapsulate broad sentiment from most corners of the industry. The message is loud and clear: things are looking up, but we need to tread lightly. Industrialists believe the market is trending back toward a stable, healthy level of expansion, but it’s likely this uptick will come with some bounces. Expect a slow recovery.

A slow recovery is far from negative. In fact, many manufacturers may actually prefer the ramp-up to normalized production as they seek to reestablish supply chains and bring back furloughed workers. Easing back into normal production may very well mean less of a chance to swell too big too fast. Registering the single largest month of manufacturing growth since 1980 is a good start, but it’s unsustainable. Manufacturing needs to level out and stabilize before it can continue its upshot.

Bins in a factory on racks

Danger looms on the horizon

While world markets stabilize and globalized trade resumes, the U.S. faces unique headwinds that could stand in the way of a stable, sustainable recovery. Rising cases of COVID-19 have ostracized the U.S. on the world stage, with many countries choosing to avoid coupling themselves to U.S. supply chains in the near term. Moreover, election season fast approaches, which promises to be as economically turbulent as it is divisive.

The good news is world manufacturing is quickly finding its swing. Major production hubs around the world are weathering the ripples of COVID-19, proving that, should the U.S. find its footing and tamp down the virus, there’s promise of a manufacturing rebound on the horizon. Much of this prospect boils down to leadership and the results of November’s election. Right now, it’s a waiting game — but one that’s thankfully trending in the right direction.

Manufacturing is rebounding, which means factories need to prepare to scale. Now’s the time to service, repair, and maintain equipment, so you’re ready to meet demand on the upswing. 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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