This Business News Story Was Uncovered By Us From: https://www.under30ceo.com/economic-concerns-us-manufacturing-slump-deepens-but-inflationary-pressures-stay-in-check/
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The US manufacturing sector continues to face challenges as it experiences a deepening slump in June. The Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI) dropped to 46.0, the lowest reading since May 2020, indicating a contraction in manufacturing for the eighth consecutive month. This slump, reminiscent of the initial wave of the COVID-19 pandemic, has led to layoffs and concerns about a potential recession. However, amidst this gloomy outlook, there is a silver lining – inflationary pressures at the factory gate continue to deflate, providing some relief for the economy.
The ISM’s manufacturing PMI serves as an important indicator of the health of the manufacturing sector. A reading below 50 suggests contraction, while a reading above 50 indicates expansion. With the PMI at 46.0 in June, it is evident that the manufacturing sector is facing significant challenges.
Economists had predicted a slight increase in the index, but the actual decline reflects a deteriorating situation. The manufacturing industry accounts for 11.1% of the US economy, and with a contraction rate of 5.3% in the first quarter, as indicated by government data, the concerns of a recession are mounting.
Andrew Hunter, Deputy Chief U.S. Economist at Capital Economics, states, “This provides further reason to suspect that a recession is on the horizon.” The prolonged period of the PMI staying below 50 is the longest since the Great Recession, adding to the worries about the state of the economy.
Several factors contribute to the deepening slump in US manufacturing. One significant factor is the tightening of credit following the financial market turmoil earlier this year. The exorbitant borrowing costs have impacted the manufacturing sector, making it harder for businesses to invest and expand.
Another contributing factor is the shift in consumer spending from goods to services. With … Read More
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