Wednesday 1 July 2020 3:14 pm

US manufacturing sector rebounds as states lift lockdowns

The US manufacturing sector rebounded sharply in June, survey data showed today, fuelling hopes that the world’s biggest economy is on its way back to normality as coronavirus restrictions are lifted.

The manufacturing purchasing managers’ index from the Institute for Supply Management (ISM) jumped to 52.6 in June from 43.1 in May. A score of above 50 indicates a return to growth in the sector.

Read more: Fears over looming coronavirus job losses in UK manufacturing sector

However, many economists have said PMI readings are currently highly uncertain and that it is possible the sector grew in May after April’s crash.

“June signifies manufacturing entering an expected expansion cycle after the disruption caused by the coronavirus pandemic,” said ISM chair Timothy Fiore.

“Comments from the panel were positive… reversing the cautious trend which began in March.” 

New orders picked up dramatically, with the gauge hitting 56.4 percent in June, an increase of 24.6 percentage points from the May reading of 31.8. The employment gauge also rose markedly, climbing to 42.1 from May’s score of 32.1.

New coronavirus cases could damage recovery

However, the US’s economic recovery could yet be derailed by the coronavirus crisis. The number of Covid cases has risen sharply over the last two weeks. 

The surge in new cases has prompted Texas and Florida – two of the worst-hit states – to pause many of their plans to reopen. Stock markets have been jittery, with investors worrying that another round of lockdowns could tank the economy.

A separate PMI gauge produced by data firm IHS Markit rebounded at its fastest pace on record in June, the company said today. It shot up to 49.8 in June from 39.8 in May.

On the IHS Markit gauge, a score below 50 indicates the sector is still contracting. However, economists have warned that economic data is highly uncertain at the moment and that PMIs should not be taken too literally.

Chris Williamson, chief business economist at IHS Markit, said: “US manufacturers have reported a marked turnaround in business conditions through the second quarter.”

He said that “collapsing production and demand in April at the height of the Covid-19 lockdown” had turned “rapidly to stabilisation by June”.

Read more: Eurozone manufacturing downturn eased in June as lockdowns loosened

Yet he warned that the recovery would come under threat unless the US got on top of its coronavirus outbreak.

Williamson said: “Concerns have risen that momentum could be lost if rising numbers of virus infections lead to renewed restrictions and cause demand to weaken again.”