US Manufacturing Growth Continues in June as Factory Hiring Falls Sharply

Manufacturing Activity Strengthens

U.S. manufacturing activity improved again in June, supported by companies placing orders earlier than usual to reduce the risk of future shortages and higher prices. The flash manufacturing PMI rose to 55.7, its highest level since May 2022, compared with 55.1 in May.

The manufacturing sector has now recorded growth for four straight months, with businesses increasing purchases and rebuilding inventories to stay ahead of potential supply constraints.

Services Sector Also Improves

The services PMI increased to 51.3 from 50.7 in May, helping lift the composite output index, which tracks both manufacturing and services activity, to 52.2. Increased activity linked to the FIFA World Cup was cited as one factor supporting services demand.

Employment Weakens Despite Growth

While production and orders improved, factory hiring moved in the opposite direction. Manufacturing employment fell to 47.0, its lowest reading since May 2020.

According to S&P Global, companies reduced staffing levels due to concerns about future business conditions and rising operating costs, particularly higher raw material expenses.

Orders and Inventory Levels Rise

New factory orders climbed to their highest level in more than four years. Businesses also increased stock purchases, with inventory-building reaching its strongest pace in over a year.

Demand was supported by companies acting ahead of possible supply disruptions and expected price increases.

Supply Chains and Inflation Remain Concerns

Supplier delivery times lengthened during June, reflecting ongoing supply chain pressures. Although input cost growth eased compared with May, price levels remained elevated.

Manufacturers continued passing some of those higher costs on to customers, though the pace of price increases moderated.

Interest Rate Outlook

Persistent inflation pressures remain consistent with expectations that inflation could stay elevated for some time. The Federal Reserve kept interest rates unchanged at its latest meeting but signaled that additional rate increases remain possible this year as policymakers continue to monitor inflation trends.