On July 3rd the Commerce Department’s Census Bureau released their data on new orders for U.S.–manufactured goods for the month of May. Economists were expecting orders to increase by 0.3% but they ended up contracting by 0.5%, which ended a three-month streak of increasing orders for manufactured goods. Along with the data on new orders, on July 1st the ISM manufacturing index, also known as the purchasing manager index (PMI) came in at 48.5%, which was below the median forecast of 49.2%.
Manufacturing plays a major role in economic growth and accounts for 10.3% of the U.S. economy. As the Fed tries to accomplish a soft landing without pushing the U.S into a recession it is critical to keep an eye on manufacturing. Manufacturing data can help one better understand current economic conditions and where the economy is poised to go.
The current economic conditions have not been favorable for manufacturing with the Institute for Supply Management saying that Manufacturers are showing “an unwillingness to invest in capital and inventory due to current monetary policy and other conditions.” Due to these factors the manufacturing sector experienced a shrinkage at an annualized rate of 4.3% during the first quarter of 2024. With at least one rate cut expected this year and a soft landing of the economy by the fed, hopefully the manufacturing sector will be able to rebound and start growing again.
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