June 2018 Institute for Supply Management

America is manufacturing a boom according to the latest data from the Institute for Supply Management.  Both sides of the economy look strong from the June 2018 purchasing managers’ perspective.  Manufacturing’s reading reached 60.2 (anything above 50 is acceptable and above 55 is robust) after May’s tally of 58.7.  Over on the service side, the reading hit 59.1 from 58.6 a month earlier.

Both forward-looking and coincident components look strong in manufacturing.  New orders remained above sixty once again but did back off two-tenths of a percentage point to 63.5 which continues signaling strong output on the horizon.  Production moved up eight-tenths of a percentage point to 62.3, boding well for second quarter gross domestic product (GDP).  However, there are signs of stress in this release.  Supplier deliveries are slowing down, suggesting capacity shortages.  At 76.8, prices are fairly high even after falling 2.7 percentage points.  Also worth noting is the word tariffs; half of the respondents (five out of 10) quoted in the survey mentioned them at least once.  There is obviously some concern about the current trade skirmishes. 

Services are thriving as well.  New orders rose 2.7 points to 63.2 as Americans are poised to consume more in the near future.  Business activity/production hit 63.9 after gaining 2.6 percentage points, also boding well for second quarter GDP.  Tariffs were also a concern on the services side of the economy, along with capacity constraints and delivery issues. 

This is one of the more optimistic indicators out there (perhaps rivaled only by the National Federation of Independent Business).  There are some concerns about trade issues beginning to appear, but these worries could evaporate quickly if more negotiations begin producing agreements.  For now, Atlas puts this indicator in the win column for the American economy.