- ISM’s June 2025 Manufacturing PMI edged up to 49.0 from 48.5, signaling a fourth straight month of contraction.
- Production and supplier deliveries improved, but new orders, backlogs, employment, and trade measures stayed in contraction.
- Input costs surged as the Prices Index jumped to 69.7%, driven by tariffs and higher steel, aluminum, and other raw material prices.
- ISM’s PMI-to-GDP mapping implies about 1.9% annualized real GDP growth, though weak demand and policy uncertainty raise downside risk.
Read More
The June 2025 ISM Manufacturing Report confirms that while the pace of contraction in the US manufacturing sector is slowing, the broader trend remains negative. The headline PMI of 49.0, though up from 48.5 in May, remains below the 50 mark that separates growth from contraction, marking the fourth consecutive month of shrinkage.
Sub-index improvements vs continued weaknesses: Two of the five PMI components—Production and Supplier Deliveries—moved back into expansion in June. Production owing to easing input bottlenecks and inventory drawdowns, and supplier deliveries due to reduced port congestion. However, New Orders, Employment, Backlogs, Exports and Imports all stayed firmly in contraction, often at faster rates. Inventory indicators rose but remain below growth territory.
Cost pressures and inflation: The Prices Index jumped to 69.7%, its ninth straight month of increase, driven particularly by steel, aluminium, tariffed goods, and general raw material inflation. Producers are still paying significantly more for inputs and passing through costs where possible, though this worsens competitiveness.
Implications for GDP and economic outlook: ISM relates the PMI reading to approximately +1.9% annualized real GDP growth, but given ongoing weak demand—as evidenced by declining new orders and export activity—the risk of falling short of that pace is elevated. With employment in the sector continuing to decline and demand soft, spillover effects on investment and durable goods production are likely.
Strategic concerns and trade environment: Many manufacturers report uncertainty over tariff policies and costs, interruptions in global supply chains, and depressed trade activity. Surveys and commentary suggest businesses are delaying hiring and capital expenditures until clarity improves. These pressures undermine both near-term operational performance and long-term investment planning.
Open questions:
- Will the manufacturing sector find support from rising production to reverse contraction, or will low orders and weak exports drag it back?
- How much of the input inflation can be passed through, and how much will be absorbed—damaging margins or forcing price hikes with inflationary spillover?
- Can tariff policy and trade relations stabilize sufficiently to restore business confidence and investment momentum?
- Is employment decline in the sector accelerating enough to create broader labor market risk or prompt policy action?
Supporting Notes
- Manufacturing PMI registered 49.0 percent in June, up 0.5 pp from May’s 48.5; sector contracted for the fourth straight month.
- New Orders index at 46.4 (contracting again); Production 50.3 (back in expansion); Employment 45.0 (declining).
- Prices Index 69.7%, highest since June 2022 in recent months; materials like aluminum, steel, natural gas, packaging up sharply.
- Backlog of Orders contracted 33 consecutive months; New Export Orders contracted for fourth month; Imports still contracting but less sharply.
- ISM estimates June 2025 PMI corresponds to ~+1.9% annualized real GDP growth, using the long-term relationship between PMI and overall economy.
- Tariff doubling on steel and aluminum in mid-2025, coupled with increased costs noted industry-wide; uncertainty from trade policy among manufacturers.