PMI Data Deteriorates, Rate Hike Actions Have More Severe Effects?

<p>&nbsp;The U.S. manufacturing sector declined further in June, reaching levels last seen as the economy reeled from the initial wave of the Covid-19 pandemic, according to a survey on Monday.</p><p><br /></p><p>The Institute for Supply Management (ISM) reported that its manufacturing PMI fell to 46.0 last month, the lowest reading since May 2020, from 46.9 in May. That marked the eighth consecutive month the PMI remained below the 50 threshold, which indicates a contraction in manufacturing.</p><p><br /></p><p>Economists polled by Reuters had forecast the index rising to 47. Manufacturing, which accounts for 11.1% of the economy, contracted at an annual rate of 5.3% in the first quarter, government data showed last week.</p><p><br /></p><p>Despite strong demand for goods such as transport equipment, machinery and electrical equipment, appliances and components.</p><p><br /></p><p><br /></p><p>The U.S. manufacturing sector is struggling under the setting of interest rates that have increased by 500 basis points where the U.S. central bank embarked on the fastest monetary policy tightening campaign in over 40 years.</p><p><br /></p><p>Spending shifts to services rather than goods, which are usually purchased on credit. Businesses are also managing inventory carefully in anticipation of weak demand.</p><p><br /></p><p>Business inventories rose at the slowest pace in 1-1/2 years in the first quarter. Economists say the sector has not been affected by the tightening of credit following the financial market turmoil earlier this year.</p><p><br /></p><p>The forward-looking new orders sub-index of the ISM survey rose to a still weak 45.6 from 42.6 in May. Weak demand leads to low input prices. A survey measure of prices paid by manufacturers fell to 41.8 from 44.2 in the previous month as congestion in the supply chain eased significantly and higher borrowing costs weighed on demand.</p>