The slump in U.S. manufacturing continued for an eighth straight month in June on the back of weak demand and slowing production, according to survey data published Monday.
The data from the Institute for Supply Management (ISM) also indicates the ongoing contraction in the sector is picking up pace, at the same time as other sectors of the US economy show signs of unexpected buoyancy.
"The June composite index reading reflects companies continuing to manage outputs down as softness continues and optimism about the second half of 2023 weakens," ISM Business Survey Committee Chair Timothy Fiore said in a statement.
The ISM figure for June came in at 46%, down from 46.9% last month, the ISM said in a statement. This was well below the median forecast of economists surveyed by MarketWatch.
A reading below 50% indicates that the manufacturing sector is generally contracting.
Of the six largest manufacturing industries, only transportation equipment saw growth last month, according to the ISM survey, underscoring the difficulties facing the manufacturing sector at-large.
"Manufacturing remains in a sorry state -- automakers excepted -- as higher interest rates have depressed capital spending and the much-discussed boost from China’s re-opening has disappointed," Pantheon Macroeconomics' senior US economist Kieran Clancy wrote in a note to clients.
The U.S. Federal Reserve recently announced it was pausing its aggressive campaign of interest rate hikes after 10 consecutive increases to tackle high inflation.
But policymakers, including Fed Chair Jerome Powell, have indicated that they still expect as many as two additional rate hikes this year.
Analysts and futures traders expect that the next increase to the Fed's benchmark lending rate could come later this month, which could put further pressure on the manufacturing sector.
"Demand remains weak, production is slowing due to lack of work, and suppliers have capacity," Fiore from ISM said.
"There are signs of more employment reduction actions in the near term," he added.
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