Service and manufacturing in the Midwest continued to be in deep contraction in June, but the pace of slowdown improved in line with market expectations.
The ISM-Chicago Business Barometer advanced by 5 points to a 39.9 reading in June, a decent improvement from the weak reading in May but still 10 points away from expansion.
The report “continued to reinforce the consensus observation that this recession not only is deep, but also is broadly based,” a press release said.
Details of the report were mixed. Many components were improving but not a single one was in expansion mode.
Key Details:
- Production slipped 3.5 points to 39.5.
- New Orders edged up half a point to 42.5.
- Employment is still in rapid decline with a 30.5 reading, up 3 points from May.
- Inventories were below 50 for the 8th straight month, but improved to 34.2 in June.
- Prices were firmer at 36.3, up from 29.8 last month.
“This is consistent with our view that the pace of contraction is slowing, and growth will resume (albeit moderately) in the fourth quarter of this year,” said Joseph LaVorgna from Deutsche Bank.
The nationwide ISM report comes out tomorrow. The consensus is expecting a reading of 44.0, which would indicate continued slowdown in manufacturing, but that score would be historically consistent with overall growth in the economy. In May the ISM was 42.8.