The American manufacturing sector continued its upward trajectory in June 2026, marking the sixth consecutive month of expansion despite a slight deceleration in the pace of growth. According to the latest ISM® Manufacturing PMI® Report issued today by the Institute for Supply Management® (ISM®), the composite index registered 53.3 percent. While this figure represents a 0.7-percentage point decrease from May’s 54.0 percent, it remains firmly above the 50-percent threshold that separates expansion from contraction. This sustained growth period follows a challenging ten-month stretch of contraction that concluded in late 2025, signaling a stabilized recovery for the nation’s industrial base.
Susan Spence, MBA, Chair of the ISM® Manufacturing Business Survey Committee, noted that the broader U.S. economy has now expanded for 20 consecutive months. The June reading of 53.3 percent, when projected over time, corresponds to an approximately 2-percent increase in real gross domestic product (GDP) on an annualized basis. However, the report also highlighted significant headwinds, including geopolitical instability in the Middle East and persistent trade tensions, which have weighed on executive sentiment and price volatility.
A Comprehensive Breakdown of the June PMI Components
The Manufacturing PMI® is a composite index based on the diffusion indexes for five core areas: New Orders, Production, Employment, Supplier Deliveries, and Inventories. In June, four of these five subindexes were in expansion territory, providing a multifaceted look at the current state of industrial health.
Demand and New Orders
The New Orders Index registered 56 percent in June, a slight dip of 0.8 percentage points from the 56.8 percent recorded in May. Despite the minor decrease, this represents the sixth month of growth for new orders following a prolonged period of contraction. Of the six largest manufacturing industries, four—Computer & Electronic Products, Machinery, Transportation Equipment, and Chemical Products—reported an increase in new orders. Demand sentiment remained largely positive among survey respondents, with a 2.7-to-1 ratio of positive to negative comments regarding order volume.
The Backlog of Orders Index, another key indicator of future demand, registered 50.5 percent. This was a 1.7-percentage point decrease from May’s 52.2 percent. While the backlog is still growing, the slower rate suggests that manufacturers are beginning to catch up with existing demand as production levels stabilize.
Production and Output
The Production Index stood at 52.2 percent in June, down 2.1 percentage points from May’s 54.3 percent. This marks the eighth consecutive month of production growth. Industry analysts suggest that while output remains positive, the cooling pace reflects a strategic adjustment by firms to align production with current inventory levels and slightly softer new order growth. Consistent with the New Orders Index, the major drivers of production growth were the technology, machinery, and transportation sectors.
Employment Trends
The Employment Index registered 49.7 percent, an improvement of 1.1 percentage points from May’s 48.6 percent. Although the index remains technically in contraction (below 50 percent), it has shown steady improvement. Remarkably, the Employment Index has been in a state of contraction for 33 consecutive months, yet the June data suggests a shift in labor management strategies.
According to the report, 64 percent of panelists indicated their companies are actively hiring, while 36 percent are focused on managing or reducing headcounts. This is a significant reversal from January 2026, when 66 percent of companies were focused on managing staff levels rather than expansion. The transition toward hiring indicates a growing confidence in the long-term stability of the manufacturing sector, even as firms remain cautious about short-term overhead.
Supply Chain and Deliveries
The Supplier Deliveries Index registered 57.4 percent, a 3.2-percentage point decrease from May. In this specific index, a reading above 50 percent indicates slower deliveries. June marked the seventh month of slowing supplier performance, a trend typically seen when the economy improves and demand places pressure on logistics and supply chains. No industries reported faster deliveries in June, underscoring a universal tightening in the movement of goods.
Inventory Management
The Inventories Index returned to expansion territory in June, registering 51.4 percent, up 1.5 percentage points from May. This suggests that firms are beginning to rebuild stocks after a period of lean inventory management. Conversely, the Customers’ Inventories Index remained in "too low" territory at 42.3 percent. Historically, a "too low" reading for customers’ inventories is a bullish signal for future production, as it necessitates further orders to replenish downstream supplies.
Price Volatility and Commodity Trends
One of the most significant shifts in the June report was the sharp decline in the Prices Index. The index registered 73 percent, a 9.1-percentage point drop from May’s 82.1 percent. While raw materials prices are still increasing—marking the 21st consecutive month of price hikes—the rate of increase has slowed considerably. This 9.1-point drop is the most substantial deceleration in price growth since July 2022.
The persistence of high prices is attributed to three primary factors:
- Metals: Sustained increases in steel and aluminum prices affecting the entire manufacturing value chain.
- Trade Policy: Tariffs applied to a wide range of imported goods.
- Geopolitics: The ongoing conflict in the Middle East, specifically the Iran war, which has led to price spikes in petroleum-based products and increased freight costs.
Commodities at a Glance
The report identified several commodities that have seen sustained price increases. Aluminum has risen in price for 31 consecutive months, while copper has seen 12 months of increases. Electrical and electronic components have also remained on the "up" list for a significant duration, reflecting the ongoing demand for high-tech manufacturing inputs.
Items reported in short supply include electrical components, semiconductors, and hot-rolled steel. These shortages continue to pose a risk to production timelines, particularly in the Computer & Electronic Products and Machinery sectors.
Industry Performance and Sector Analysis
Of the 18 manufacturing industries tracked by the ISM®, 14 reported growth in June. The top-performing sectors included Printing & Related Support Activities, Electrical Equipment, and Textile Mills.
In contrast, only three industries reported contraction:
- Paper Products
- Furniture & Related Products
- Wood Products
Among the "Big Six" manufacturing industries—which represent the largest share of the manufacturing GDP—five showed expansion: Computer & Electronic Products; Machinery; Transportation Equipment; Chemical Products; and Food, Beverage & Tobacco Products. The only major sector to contract in June was Petroleum & Coal Products.
Historical Timeline and Economic Context
To understand the June 2026 data, it is essential to look at the trajectory of the manufacturing sector over the previous year. The sector spent much of 2025 in a state of contraction as it grappled with high interest rates and a post-pandemic rebalancing of consumer demand from goods to services.
- July 2025 – November 2025: The PMI fluctuated between 48.0 and 48.9 percent, indicating a persistent but shallow contraction.
- December 2025: The sector hit its recent low of 47.9 percent.
- January 2026: The sector entered expansion territory with a reading of 52.6 percent, driven by a surge in new orders at the start of the fiscal year.
- February 2026 – May 2026: Growth stabilized, peaking in May at 54.0 percent.
- June 2026: The current reading of 53.3 percent confirms that the expansion is sustainable, though it may be entering a more mature, slower phase of growth.
External Influences: War, Tariffs, and Sentiment
While the quantitative data points to growth, the qualitative sentiment among supply executives is notably more cautious. The report found that only 34 percent of executive comments were positive, while 66 percent were negative. This 1-to-1.9 ratio of positive-to-negative sentiment highlights a "wall of worry" that manufacturers are currently climbing.
The primary concerns cited by panelists include:
- The Iran War: Mentioned by 31 percent of respondents as a source of supply chain disruption and energy cost inflation.
- Tariffs: Mentioned by 17 percent of panelists as a burden on international sourcing and a driver of input costs.
- Pricing Volatility: 50 percent of the panelists identified fluctuating costs as a primary challenge for budgeting and long-term contract negotiations.
Additionally, the New Export Orders Index returned to contraction in June, registering 48.5 percent. This suggests that while domestic demand remains robust, the global market is cooling, likely due to the aforementioned geopolitical tensions and a strengthening U.S. dollar making American exports more expensive abroad.
Broader Economic Impact and Future Outlook
The manufacturing sector’s performance is often viewed as a bellwether for the broader U.S. economy. The fact that the sector has remained in expansion for half a year suggests that the U.S. industrial base has successfully navigated the "soft landing" sought by economic policymakers.
The 2-percent annualized GDP growth suggested by the June PMI is a healthy, sustainable rate that minimizes the risk of overheating while avoiding recessionary territory. However, the contraction in New Export Orders and the continued (though slowing) rise in input prices suggest that the path ahead is not without obstacles.
Economists and market analysts will be closely watching the Employment Index in the coming months. If the current hiring trend continues and the index crosses back over the 50-percent threshold, it would signal a complete recovery of the manufacturing labor market. Furthermore, if the "too low" status of customers’ inventories persists, it could trigger a stronger production surge in the third and fourth quarters of 2026.
In conclusion, the June 2026 ISM® Manufacturing PMI® paints a picture of a resilient sector that is growing despite significant external pressures. While the pace of expansion has moderated, the underlying fundamentals—driven by strong domestic orders and a shift toward proactive hiring—suggest that the U.S. manufacturing industry remains a cornerstone of national economic stability in an increasingly volatile global landscape.
About the Institute for Supply Management®
The Institute for Supply Management® (ISM®) is the first and largest not-for-profit professional supply management organization worldwide. Its monthly Manufacturing PMI® is one of the most reliable economic indicators available, providing timely data on the health of the U.S. economy based on surveys of supply executives in 18 industries.
