Manufacturers are mired in a slump, ISM finds, and aren’t adding much to the U.S. economy

Manufacturers are mired in a slump, ISM finds, and aren’t adding much to the U.S. economy

The numbers: A key barometer of U.S. factories fell in June for the third month in a row, signaling that an ongoing slump in the industrial side of the economy shows no sign of ending.

The Institute for Supply Management’s manufacturing index slipped to 48.5% in June from 48.7% in the prior month. Numbers below 50% signal that the manufacturing sector is shrinking.

“The manufacturing economy still appears to be stalled,” said Timothy Fiore, chairman of the ISM Manufacturing Business Committee.

The one bit of good news: A gauge of prices fell to a six-month low and pointed to slower inflation in the U.S.

The ISM report is viewed as a window into the health of the economy. Economists polled by the Wall Street Journal had forecast the index to rise slightly last month.

Key details:

• The index of new orders rose 3.9 points to 49.3% — just below breakeven — in a small sign of progress.
• The production barometer slid 1.7 points to 48.5%.
• The employment gauge fell 1.8 points to 49.3%.
• The price index, a measure of inflation, dropped 4.9 points to 52.1%, marking the lowest level since December.

Big picture: The industrial side of the economy is in a rut. It’s probably not going to get out of one until interest rates fall and customer demand snaps back for big-ticket items such as appliances and new cars.

Looking ahead: Fiore said businesses are waiting for a significant decline in interest rates. The Federal Reserve is weighing whether to cut high borrowing costs soon if inflation continues to slow toward low prepandemic levels.

“People are reluctant to invest,” he said.

Still, Fiore insisted the industrial side of the economy is not in freefall. “We’re stable,” he said. “That’s not a bad thing.”

Market reaction: The Dow Jones Industrial Average and S&P 500 index rose in Monday trades.