US manufacturing fell for third straight month in June, but furniture sector grew

TEMPE, Ariz. — U.S. manufacturing activity contracted for a third straight month in June and the 19th^t According to the latest report by the Institute for Supply Management (ISM), there was one less drop in the last 20 months.

The furniture manufacturing industry was one of the report’s bright spots, being one of eight sectors to see growth.

Timothy R. Fiore, chairman of the ISM, noted that “the manufacturing PMI was 48.5 percent in June, down 0.2 percentage points from the 48.7 percent recorded in May. The overall economy continued to expand for a 50th month after a month of contraction in April 2020. A manufacturing PMI above 42.5 percent for a period of time generally indicates expansion in the overall economy.”

“Demand remains subdued as companies are reluctant to invest in capital and inventory due to current monetary policy and other conditions. Manufacturing executions are down from the prior month, which likely caused revenues to decline, putting pressure on profitability. Suppliers continue to have capacity and lead times are improving, and shortages are no longer as acute,” Fiore added.

The inventory ratio fell to 45.4 percent in June, down 2.5 percentage points from May’s 47.9 percent. Manufacturing inventories shrank faster than the previous month, and none of the six major industries reported an increase in June. Demand uncertainty is prompting companies to cut inventory investments, relying instead on suppliers for “on-demand” inventory. The furniture industry was one of 10 surveyed areas to report a reduction in inventory in June.

Finally, manufacturing employment fell slightly in June after a gain in May. “Many firms in Business Survey Committee respondents continue to reduce their workforces through layoffs, attrition and hiring freezes. Panelist comments in June indicated a slight decline in staff reductions compared with May, supporting a ratio of about 1.3 to 1 for hiring to job cuts,” Fiore noted.

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