The Econoday factory sector activity index (EFSAI)* for June is 17.5 after 13.3 in May and 11.5 in April. The reading suggests that factory sector activity is trending higher overall. However, it should be noted that activity I June rose in three regional surveys (Philadelphia, Kansas City, and Chicago) while it was down in three others (New York, Richmond, and Dallas). Nonetheless, all surveys report at least modest growth conditions except Dallas where activity was flat.
The immediate disruptions from the war on Iran begun on February 28 are in the rear view, although economic outlook remains uncertain as the war drags on and a hope for a peace deal keep getting dashed. Energy costs related to oil prices have eased considerably even as the price per barrel of crude oil remains well above the late February prices.
The Econoday factory sector prices paid index (EFSPPI)# rose to 46.3 in June from 44.4 in May and 43.3 in April. This is the highest reading since 56.1 in July 2022. The recent drop in oil prices will take a month or two to show up materially in manufacturers’ costs. Upward price pressures in the supply chain are still being felt.
The Econoday factory sector employment index (EFSEI)## points to stronger hiring by manufacturers in June. The index is up to 8.1 in June from 0.9 in May and 1.8 in April. Businesses in the factory sector may have found more qualified applicants among the recent graduating classes at high schools and colleges.
The EFSAI has strong correlations** with the major national indexes for activity in the factory sector. It indicates that June could see a firming in the national indicators.
The S&P manufacturing purchasing managers index had a flash reading of 55.7 for June after 55.1 in May. This is a rise for the third month in a row and to levels not seen since the first half of 2022. There could be an increase in manufacturing payrolls in the monthly employment report for June at 8:30 ET on Thursday, July 2.
The ISM manufacturing index was unchanged at 54.0 in in May from April and a little higher than the 52.7 in April and March. The EFSAI points to another increase in the ISM measure for June.
The S&P final manufacturing index for June is set for release at 9:45 ET on Wednesday, July 1.
The ISM manufacturing index for June is set for release at 10:00 ET on Wednesday, July 1.
*The EFSAI is an average of seasonally adjusted indexes from the Federal Reserve district bank surveys of manufacturing that includes smoothing for month-to-month volatility. The districts correspond with about 48 percent of the US labor force. An index above 0 indicates expanding activity and below 0 indicates contracting activity.
**S&P PMI for manufacturing correlation 0.807, ISM manufacturing 0.885.
#The EFSPPI is an average of unadjusted indexes from the Federal Reserve district bank surveys of manufacturing. The EFSPPI has a correlation of 0.856 with the ISM manufacturing prices paid index.
##The EFSEI is an average of seasonally adjusted indexes from the Federal Reserve district bank surveys of manufacturing. The EFSEI has a correlation of 0.704 with the ISM manufacturing employment index.
