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The numbers: A barometer of business conditions at American factories fell to the lowest level since 2020 when the U.S. was locked down during pandemic, underscoring broad weakness in the industrial side of the economy.
The Institute for Supply Management’s manufacturing survey dipped to 46% in June from 46.9% in the prior month. It was the lowest reading since May 2020.
Numbers below 50% signal contraction in the industrial side of the economy. The index has been negative for eight months in a row, a bout of weakness last experienced during the 2007-2009 Great Recession.
Economists polled by the Wall Street Journal had forecast the index to register 47.3% in June.
Big picture: Auto makers have been a bastion of strength this year due to rising car sales, but most manufacturers have experienced slack demand. They’ve responded by reducing inventories and slowing production.
The industrial side of the economy is unlikely to make a big rebound until the Federal Reserve stops raising interest rates. The Fed is primed to raise rates a few more times this year to help stamp out high inflation.
Higher borrowing costs dissuade consumers and businesses from making expensive purchases.
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
fell slightly in Monday trades.
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