U.S. Manufacturing Gauge Rises to 14-Month High on Reopenings
An employee wearing a protective face mask fits a battery unit cover for a Skoda Superb hydrid automobile at the Skoda Auto AS factory, operated by Volkswagen AG, in Kvasiny, Czech Republic. (Photographer: Milan Jaros/Bloomberg)

U.S. Manufacturing Gauge Rises to 14-Month High on Reopenings

A closely watched measure of U.S. manufacturing jumped in June to the highest in more than a year, signaling the resumption of growth as pandemic-related lockdowns ended.

The Institute for Supply Management said Wednesday that its gauge jumped by 9.5 points, the most since August 1980, to 52.6 last month. Readings above 50 indicate that manufacturing is expanding, and the latest figure exceeded the 49.8 median projection of economists in a Bloomberg survey. More factories reported growth in orders and production.

U.S. Manufacturing Gauge Rises to 14-Month High on Reopenings

The data mark a turnaround from just two months earlier when the factory gauge tumbled to an 11-year low as states closed most non-essential businesses to help contain the coronavirus. At the same time, the level of manufacturing activity, like much of the rest of economy, will probably remain below pre-pandemic levels for some time.

“I feel good that the demand side here has recovered somewhat,” Timothy Fiore, chairman of the ISM Business Survey Committee, said on a call with reporters. “The issue is going to be, as these factors come up, will people come out, will consumption continue at levels that will allow the PMI to expand.”

The ISM measure of orders surged 24.6 points in June, the most in records back to 1948, while the production gauge posted the strongest monthly advance since 1952.

Thirteen of the 18 manufacturing industries reported growth in June, led by textiles, wood products and furniture. Four contracted, including transportation equipment and primary and fabricated metals.

Because the ISM’s report is based on a survey, which asks purchasing managers whether activity is increasing, decreasing or stagnant, the figures can be prone to big swings during turning points in the economy. The industry is facing multiple hurdles that include high unemployment nationwide, a recent pickup in coronavirus cases, cutbacks in business investment and a global recession.

Around the world, manufacturing is looking like it’s over the worst of the slump. The euro-area PMI rose in June, though employment fell across the region, pointing to the lingering threat of rising unemployment. IHS Markit also noted that with sentiment and production below pre-crisis peaks, the initial rebound in the surveys could flatten out.

In Asia, the measures for Japan, South Korea, and Taiwan improved slightly in June, though remained below the key 50 level that divides expansion from contraction. Gauges for China also rose.

The ISM report’s gauge of U.S. factory employment, while improving by the most since April 1961, remains depressed at 42.1 and shows manufacturers are continuing to reduce headcount. The group’s measure of exports also rose but still shows weaker demand from overseas customers.

The new orders index rose to 56.4 in June, the highest level since January of last year, while the index of production climbed to 57.3, the strongest reading since November 2018.

©2020 Bloomberg L.P.

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