US Manufacturing Mired in Weakness as Tariffs Bite

• U.S. manufacturing remained sluggish in June, with new orders subdued and prices paid for inputs creeping higher, suggesting that the Trump administration's tariffs on imported goods continued to hamper businesses' ability to plan ahead.
• The Institute for Supply Management (ISM) said on Tuesday that its manufacturing PMI nudged up to 49.0 last month from a six-month low of 48.5 in May. Despite this increase, it was the fourth straight month that the PMI was below the 50 mark, which indicates contraction in the sector that accounts for 10.2% of the economy.
• The survey joined with weak data on the housing market, consumer spending and swelling unemployment rolls that have suggested the economy's underlying momentum slowed further in the second quarter, even as gross domestic product probably rebounded as the drag from a record trade deficit faded due to falling imports.
• President Donald Trump's sweeping tariffs, which have led businesses and households to front-run imports and goods purchases to avoid higher prices from duties, have muddled the economic picture. Economists warned it could take time for the tariff-related distortions to wash out of the economic data.
• The PMI last month was likely lifted by longer delivery times, which under normal circumstances would be related to strong demand. However, the extensive tariffs have caused bottlenecks in the supply chain, resulting in factories waiting longer for raw material deliveries.
• Though production at factories picked up last month, it was probably the result of manufacturers working through backlog orders. The ISM survey's forward-looking new orders sub-index dropped to 46.4 from 47.6 in May. This measure has now contracted for five consecutive months. With manufacturers facing weak demand and higher prices for inputs, employment declined further last month. The survey's measure of manufacturing employment fell to 45.0 from 46.8 in May.

(Source: Reuters)