Us factories decline for first time in 2 years in June

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Us factories decline for first time in 2 years in June

The Institute for Supply Management's barometer of American factories fell to a two-year low of 53% in June. The ISM index dropped 3.1 points from 56.1% in May.

The report cited high inflation as a big problem, but noted that price pressures slowed for the third month in a row.

The June reading was the weakest since June 2020, and the June reading was above 50% when it comes to growth. The index was projected to total 54.3%, according to economists polled by The Wall Street Journal.

The report, compiled by the Institute for Supply Management, is a picture of the health of the U.S. economy.

The business is not growing as fast as it was last year, because manufacturers are still operating at high capacity. In June, new orders contracted for the first time in two years.

The problem is caused by the shortage of supplies and labor, but customers have scaled back orders because of high prices, long lead times and excess inventory.

The inflation index, a measure of inflation, fell 3.7 points 78.5%. It has fallen three months in a row after touching 87.1% in March.

Timothy Fiore, chairman of the ISM survey, downplayed the decline in new orders. He said some companies over-ordered earlier in the year because they were unsure when the products or supplies would arrive in light of record lead times. They are whittling down excess inventories.

Fiore said that most manufacturers are still trying to hire because demand remains strong. There is no indication that there is a pending recession. If companies were worried about demand falling off, they wouldn't be hiring. Fiore said he would only be worried if lead times fell and orders remained weak.

Oren Klachkin, lead U.S. economist at Oxford Economics said that the U.S. manufacturers will face less rosy economic backdrop in the second half of 2022.

Market reaction: Dow Jones Industrial Average DJIA and S&P 500 SPX fell in Friday trades, as a recent mini-rally appeared to have fizzled out and left markets well below their all-time highs.