U.S. manufacturing expanded for the sixth consecutive month in June, with the S&P Global U.S. Manufacturing PMI reaching a three-year high of 52.9. This was higher than the forecast of 52.0. However, tariffs continued to affect the sector, leading to increased inventory buildup and a sharp acceleration in inflation.
Here is an excerpt from Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, in the latest press release:
“June saw a welcome return to growth for US manufacturing production after three months of decline, with higher workloads driven by rising orders from both domestic and export customers. Reviving demand has also encouraged factories to take on additional staff at a rate not seen since September 2022.
“However, at least some of this improvement has been driven by inventory building, as factories and their customers in retail and wholesale markets have sought to safeguard against tariff-related price rises and possible supply issues. It therefore seems likely that we will get pay-back in the form of slower growth as we head into the second half of the year.
“These price pressures are already building, with factories reporting steep cost increases again in June, linked to tariffs, which they are passing through to customers. The big question of course is whether this merely results in a short-term change in the price level rather than a more worrying return of stubborn inflation.
“More encouragingly, business confidence has continued to improve from the low-point seen in April, with US manufacturers becoming more optimistic in the face of fewer trade and tariff worries compared to the heightened uncertainty seen in April, That said, many firms remain cautious as they await news of trade deals as the deadline for paused tariffs draws closer.”
Background on the S&P Global US Manufacturing PMI
The S&P Global US Manufacturing PMI™ measures the activity level of purchasing mangers in the manufacturing sector through a questionnaire of ~600 manufacturers. The reported headline number is a weighted average of New Orders (30%), Output (25%), Employment (20%), Suppliers' Delivery Time (15%), and Stocks of Purchases (10%). The S&P Manufacturing PMI is a diffusion index, meaning that a reading above 50 indicates expansion in the sector compared to the previous month and a reading below 50 indicates contraction.
