The Institute for Supply Management reported Wednesday that its Manufacturing Purchasing Managers Index fell to 53.3 in June, down from 54 in May, missing consensus forecasts that expected the index to hold at 54. Spot gold responded by reaching a session high of $4,108.20 just before the 10 a.m. ET data release, last trading at $4,094.56 per ounce for a gain of 2.17% on the day. The decline reflected slower growth in U.S. manufacturing activity, with ISM Chair Susan Spence noting that New Orders and Production indexes grew at slower rates compared to the previous month.
ISM Manufacturing PMI Falls to 53.3 in June
The ISM Manufacturing PMI registered 53.3 in June, down from May's reading of 54, which had been the highest reading since May of 2022. Susan Spence, Chair of the ISM Manufacturing Business Survey Committee, stated: "In June, U.S. manufacturing activity remained in expansion territory, growing at a slightly slower pace as compared to the month before. Of the five subindexes that make up the PMI®, the New Orders and Production indexes grew slower as compared to the previous month, the Supplier Deliveries Index slowed at a slower rate, and the Employment and Inventories indexes improved with the latter entering expansion territory."
Spot Gold Reaches $4,108.20 Session High
Spot gold shot to a session high of $4,108.20 just before the 10 a.m. ET release of the ISM data. The precious metal last traded at $4,094.56 per ounce for a gain of 2.17% on the day. Gold is trading on the edge of $4,100 and not far from session highs after the latest data showed the U.S. manufacturing sector performing below expectations.
Component Indexes Show Mixed Performance
The components of the ISM report showed a mixed picture in key areas. Spence noted: "The New Orders Index expanded for the sixth consecutive month after four straight readings in contraction, registering 56 percent, down 0.8 percentage point compared to May's figure of 56.8 percent. The June reading of the Production Index (52.2 percent) is 2.1 percentage points lower than May's reading of 54.3 percent. The Prices Index remained in expansion (or 'increasing' territory), registering 73 percent, a 9.1-percentage point decrease from May's reading of 82.1 percent."
The Backlog of Orders Index registered 50.5 percent, down 1.7 percentage points compared to the 52.2 percent recorded in May. The Employment Index registered 49.7 percent, up 1.1 percentage points from May's figure of 48.6 percent.
Economists Forecast Slower Payroll Growth
Jeffrey Roach, Chief Economist at LPL Financial, told Kitco News that the rise in New Orders and Backlog of New Orders in June's ISM Manufacturing report supports the growth trajectory for the balance of this year. "Manufacturing demand improved at the margin in June but the rise in demand didn't translate into an improvement into the employment situation," he noted. "We see downside risk for tomorrow's payroll report."
Roach stated: "We expect nonfarm payrolls grew roughly 85,000 in June as more consumers reported jobs are hard to get and businesses are not adding to payrolls as quickly as previous years. Further, FOMC chair Kevin Warsh will likely remain hawkish in tone but will keep rates unchanged at the July 29 meeting."
Roach also pointed out a significant comment from the energy sector: "According to conversations with the Institute of Supply Management, some business leaders in the energy industry reported that management is expecting to go back to February pricing structures since the spike in oil prices were driven by geopolitical stress and not regular market factors."
FAQ
What was the ISM Manufacturing PMI reading for June?
The ISM Manufacturing Purchasing Managers Index fell to 53.3 in June, down from 54 in May, missing consensus forecasts that expected the index to hold at 54.
How did gold prices react to the ISM Manufacturing data?
Spot gold reached a session high of $4,108.20 just before the 10 a.m. ET release of the ISM data and last traded at $4,094.56 per ounce for a gain of 2.17% on the day.
What are economists forecasting for nonfarm payrolls in June?
Jeffrey Roach, Chief Economist at LPL Financial, stated that he expects nonfarm payrolls grew roughly 85,000 in June, citing that more consumers reported jobs are hard to get and businesses are not adding to payrolls as quickly as previous years.
