U.S. ISM manufacturing index rise sharply in June

The U.S. ISM manufacturing index surged in June, coming in above consensus expectations. The index rose from May’s 54.9 to 57.8 in June. Consensus expectations were for the index to rise to 55.3. The rise was mainly driven by a number of subcomponents, including most notably the production index that rose from 57.1 to 62.4 and new orders that rose 4 points to 63.5. Employment also rose sharply to 57.2 from 53.5 Improvements were also seen in new export orders, imports and supplier deliveries. Inventories dropped to 49 from 51.5, was the only weak spot in the report.

In all, the headline ISM manufacturing index and several of its subcomponents are back to where they were in February and March. Meanwhile, the sharp rise in sentiment is seen as reflecting excessive optimism about policy expectations and the degree to which private sector activity would front-run actual policy changes.

“We take a more constructive view of the recent improvement in the regional and national PMI indices and see the rise as driven more by actual changes on the ground, as activity has rebounded in the second quarter relative to earlier in the year”, added Barclays.

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