A gauge of US manufacturing activity fell less than expected in June but hit its lowest level since October 2016, signaling the fallout from Washington’s multi front trade war. The Institute for Supply Management on Monday said the reading for its manufacturing index covering output, hiring and inventories fell for the third consecutive month to 51.7 in June – the lowest level in more than 21/2 years. That was down from 52.1inMay but ahead of expectations for a reading of 51. A figure above 50 indicates expansion.
The details of the report were mixed as the new orders and inventories sub indices declined while production and employment sub-indices rose. “Respondents expressed concern about US-China trade turbulence, potential Mexico trade actions and the global economy,” said Timothy Fiore, chair of ISM’s manufacturing business survey committee, in a statement. “Overall, the sentiment this month is evenly mixed.”
One respondent in the computer and electronic products industry said: “China tariffs and pending Mexico tariffs are wreaking havoc with supply chains and costs. The situation is crazy, driving a huge amount of work [and] costs, as well as potential supply disruptions.” While a number of respondents voiced concerns the impact of tariffs on decision making and forecasting, others noted global demand for their products remained strong.
The official manufacturing report follows a soft batch of regional Federal Reserve manufacturing surveys and a mixed batch of economic data that suggest a softening in US economic activity and has raised market expectations that the Fed will cut interest rates this year. However, the report on Monday arrived alongside renewed hopes of a US China trade deal that sent US stocks to record highs after Chinese president Xi Jinping and US president Donald Trump agreed to resume negotiations.