There’s been a swath of bullish new predictions from Wall Street strategists and economists since first-quarter U.S. GDP growth was revised up last week, while multiple small business surveys have revealed that the backbone of the American economy remains robust. A “soft landing”—where inflation cools without the need for a job-killing recession—is now not only possible but likely, according to many experts. Even Federal Reserve Chairman Jerome Powell said last week at a European Central Bank Forum in Sintra, Portugal, that a recession is no longer the most likely case for the American economy. This comes after his staff revealed in April that they were expecting a “mild recession” to hit within a year.
Despite the recent optimism, however, the manufacturing sector is showing signs of weakness. The ISM Manufacturing Purchasing Managers’ Index (PMI)—a survey of managers’ new orders, inventory levels, production, supplier deliveries, and employment that is used to gauge the health of the sector—fell to 46 last month from 47.1 in May, its lowest point since May 2020. The reading under 50 signals the eighth straight month of contraction in the manufacturing sector after a 29-month expansion streak.
“Broadly, the data show that the manufacturing sector is still mired in a recession,” Jefferies economist Thomas Simons wrote in a Monday research note.
Only one of six main manufacturing industries, transportation equipment, managed to grow in June. Simons also said that new order demand “remains weak,” pointing to the drop in new export orders index from 50 in May to 47.1 last month.
