June Manufacturing Report's Impact on Economic Forecasts | Episode 151 | 07-01-24

In the latest episode, we explore the significance of the ISM Manufacturing Report and its implications for the U.S. economy. The report, which gauges the health of the manufacturing sector, recently registered a contraction with a reading of 48.5, underscoring ongoing economic challenges. Megan emphasizes that this metric, below the crucial 50-point threshold indicating expansion, signals potential impacts on broader economic indicators like GDP and inflation.

She analyzes key components of the report such as new orders and delivery times, which showed slight improvements amidst overall contraction. She also explains how these factors offered insights into future manufacturing activity and supply chain efficiency, though the sector's decline in production remains a concern linked closely with GDP performance.

We also addressed the inflationary landscape, noting a decrease in manufacturers' costs albeit with persistent pressures. This nuanced interpretation of economic data prepares listeners for upcoming insights amidst a holiday-shortened week. For those seeking a deep dive into economic indicators and their implications, "Markets with Megan" provides essential analysis and updates to navigate current economic trends effectively.

We got some more information this morning on the weakening in the economy. It's Monday, july 1st, and on the first of the month we typically get the ISM manufacturing report. This report has a level of below 50 or above 50. If it's below 50, it means the manufacturing sector is contracting and what we've seen is that, despite a brief move to 50 a couple months ago, we are still seeing manufacturing in contraction territory. So it's been falling now since that peak here in March. It's at 48.5.

The components that we look at within this report. Unfortunately, there wasn't much positive in this report. Much positive in this report. The only two parts of the segments of the manufacturing sector that actually rose for the month were delivery times and new orders. So we like to look at things like production that's usually linked to GDP. That declined, that is, in contraction territory for the first time since February. And the one was one more positive in this report the prices paid component.

So this isn't the inflation indicator that we'll look at, because it's the prices paid that manufacturers have to pay. This has been elevated. It jumped all the way up to 57 last month but it's now fallen back down to 52.1. Doesn't mean that we're contracting in from an inflation standpoint, it just means that it's not as bad as it was a couple of months ago. It still is in expansion territory, so we still do have some inflation pressures, but not as bad as they were. So we'll watch to see how this filters into inflation data. We'll get some more information next week. That's all we have today. We'll be back this week. It's a short week because the 4th of July holiday, but there is a lot of economic data, so we'll be back to get you some more. This is Megan Horneman. You've listened to Markets with Megan. If you have any questions or comments, please feel free to reach out to podcast at Verdence. com. Thank you.