ISM Manufacturing Index Shows Industry Still Growing

The Institute for Supply Management announced Friday that its manufacturing index registered 55.3 in June, up 1.8 points over May. The index has been above the 50 point mark, the level indicating that the sector is expanding, for the last 23 months.

The news contradicts economists’ expectations of a weakening U.S. manufacturing industry. Economists expected the index to drop from May’s 53.5 down to 51.1 in June.

But the manufacturing sector continues to grow despite supply disruptions caused by Japan’s devastating earthquake and tsunami in March. ISM committee chair Bradley Holcomb says that new orders, production, and employment in the manufacturing sector have all grown in the last month.

The index also shows that the prices paid by manufacturers fell in June for the second month in a row, dropping to their lowest level since August 2010. However, the rising prices of commodities are still an area of concern as they continue to elevate input costs. “While the rate of price increases has slowed and the list of commodities up in price has shortened, commodity and input prices continue to be a concern across several industries,” says Holcomb.

This report comes on the heels of the ISM’s Chicago purchasing managers index, or PMI, showed that business activity in the Midwest increased from 56.6 in May to 61.1 in June despite economists forecasting a decline to 54.

The U.S. maintains the largest economy, but China has long been coming in at a close second as their economy continues to boom. However, the China Federation of Logistics and Purchasing announced a 1.1 drop in PMI to 50.9 last month, making June the third month in a row to decline.

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