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US Factory Activity Contracts for Eighth Month, Hits Lowest Level in Over Three Years

US factory activity experienced its eighth consecutive month of contraction in June, reaching the lowest level in over three years. According to data released on Monday by the Institute for Supply Management (ISM), the manufacturing gauge fell to 46, the weakest reading since May 2020, down from 46.9 in the previous month. This ongoing stretch of sub-50 readings, indicating a decline in activity, marks the longest such period since 2008–2009.

The decline in the ISM production gauge, which hit its lowest point since May 2020, suggests weakened demand for goods. The index for new orders contracted for the tenth consecutive month, while order backlogs also shrank, potentially explaining the decrease in manufacturing employment.

In June, eleven industries reported declining activity, with wood products, textile mills, and plastics and rubber products leading the way. Meanwhile, businesses face challenges in hiring hourly factory workers and qualified management candidates, along with high labor costs.

The ISM report aligns with other data indicating a struggling manufacturing sector, as regional surveys from Federal Reserve banks in Dallas, Richmond, and Philadelphia portray a pessimistic outlook. While declining commodity prices offer some relief to producers, the report highlights the continued weakness in demand, production, and employment within the US manufacturing landscape.