Data released on Thursday showed a modest decline in the ISM manufacturing index, slightly more than expected, to 60.6 from 61.2. If it were not for inflationary pressures, supply chain constraints, lack of available labor and long wait times, things would be going great in the manufacturing sector, argue analysts at Wells Fargo.
Key Quotes:
“The ISM manufacturing index came in just below expectations at 60.6 in June as the factory sector continues to grapple with the challenges of finding and retaining workers as well as sourcing the scarce raw materials and key input components they need. June brought some very incremental improvement with respect to these bottlenecks, but it will be a longer wait for the bottleneck to clear fully.”
“A bright spot in all this is that orders remain quite strong. The 66.0 registered for the orders sub-component in June indicates only slightly slower growth than the 67.0 print in May. There is a case to be made that orders could be even stronger, but shops have been forced to turn away business due to capacity constraints.”
“While there are tentative signs that bottlenecks may be beginning to ease, it is far from smooth sailing for manufacturers. The employment index dipped one point to slip below the all-important 50 level. Labor remains a challenge across the supply chain, slowing down suppliers or preventing manufacturers from running at full capacity. Only 10 of 18 industries reported hiring in June.”
“The prices paid index has now eclipsed the peak of the 2008 commodities run-up and at 92.1 is the highest since 1979. Prices pressures are coming from all sides.”
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