Despite heightened uncertainty over trade policy in June, manufacturing activity continued to expand with the ISM easing only slightly to 51.7, explained analysts at Wells Fargo. They suspect growth will remain modest in the second half of the year.
Key Quotes:
“For all the negative headlines surrounding the trade and growth environment in June, the manufacturing sector hung in there. The ISM manufacturing index edged only modestly lower in June, shedding 0.4 points. That was a bit stronger than even our above-consensus call and kept the index in expansion territory at 51.7. Nevertheless, there were a few pockets of weakness that signal activity is likely to keep struggling in the near term.”
“On the plus side, production improved over the month, with the index up nearly three points to 54.1. The employment index also edged higher for a second straight month. That said, at 54.5, it is consistent with only modest additions to factory payrolls. We expect to see continued softness in hiring at manufacturers in Friday’s employment report as the industry contended with a deteriorating trade dialogue in the run-up to the survey week in addition to the weak global environment more broadly.”
“The June survey spanned another period of heightened trade tensions. While tariffs with Mexico have been nixed, the threat looks to have contributed to the factory sector’s softness in June, with two respondents commenting on them specifically. An escalation in the trade war with China looks less likely after this weekend’s meeting between Presidents Trump and Xi, which also suggests some of June’s weakness should be discounted.”
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