June 2012 ISM Reports

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Manufacturing contracted slightly in June, with the Institute for Supply Management’s (ISM) PMI dropping to 49.7 percent, from 53.5 in May (50 percent is the breakpoint between contraction and expansion). After reciting some report details, Bradley Holcomb, chair of ISM’s Manufacturing Business Survey Committee, concluded with, “Comments from the [respondent] panel range from continued optimism to concern that demand may be softening due to uncertainties in the economies in Europe and China."
 

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The non-manufacturing sector grew at a noticeably slower pace in June, reflected by a 1.6 percentage point drop (to 52.1 percent) in the non-manufacturing index (now known simply as the “NMI”). "The Employment Index increased by 1.5 percentage points to 52.3 percent, indicating continued growth in employment at a faster rate," observed Anthony Nieves, chair of ISM’s Non-Manufacturing Business Survey Committee, in regard to perhaps the only solidly positive aspect of the report.
 

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Although the subindices netted out to no change for Wood Products, we note the decrease in customer inventoreies as a potentially positive sign. Paper Products contracted as the drop in production and export orders overwhelmed the positive effect of rising new orders. Real Estate and Ag & Forestry both reported contraction in overall activity, while Construction expanded. Nonetheless, "[the g]eneral state of business this month is flat, with no changes." claimed one Construction respondent.

Prices for paper increased in June, while diesel fuel fell. No relevant commodities were in short supply.