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The nation’s manufacturing sector continues to contract, with June marking its fourth straight month of decline, according to the latest Manufacturing ISM® Report on Business®. The PMI came in at 49 in June, indicating contraction in the sector (a sub-50 PMI signals contraction, while a reading above 50 reflects growth). The Institute for Supply Management (ISM) says weak demand, falling backlogs and ongoing job cuts are all weighing on the industry this year.
Manufacturing production experienced a slight uptick in June, according to ISM, but new orders and employment remained in negative territory as manufacturers remained cautious amid economic, tariff and policy uncertainty.
Despite recent efforts to boost domestic output, manufacturing has lost a substantial number of jobs over the last few months. Citing U.S. Department of Labor statistics, IndustrySelect says levels in U.S. manufacturing declined by 7,000 jobs in June. This followed a loss of 8,000 jobs in May and 1,000 jobs in April. Meanwhile, the overall jobs report found the U.S. economy added 147,000 jobs in June and that the national unemployment rate was unchanged at 4.1%.
Demand Indicators Remain Mixed
In its report, ISM also says that manufacturing demand indicators remain mixed at this point, with the new orders and order backlog indexes both “contracting at faster rates,” while the customers’ inventories and new export orders indexes contracting at slower rates. “A ‘too low’ status for the customers’ inventories index is usually considered positive for future production,” ISM Manufacturing Business Survey Committee Chair Susan Spence says in the report.
The nine manufacturing industries that reported growth in June were apparel, leather & allied products; petroleum & coal products; nonmetallic mineral products; miscellaneous manufacturing; furniture & related products; computer & electronic products; machinery; food, beverage & tobacco products; and electrical equipment, appliances & components. And the six industries that contracted were textile mills; wood products; paper products; chemical products; transportation equipment; and fabricated metal products.
“Regarding output, the production index increased month over month and is now in expansion territory,” she continues, noting that the employment index dropped into contraction territory because managing headcount, as opposed to hiring, is “still the norm.”
Here’s What Manufacturers are Saying
As part of its reporting process, ISM also gathered input from a variety of different manufacturers, many of which mentioned the tariff situation in their responses for the June report. “The tariff mess has utterly stopped sales globally and domestically. Everyone is on pause. Orders have collapsed,” said one representative from a machinery manufacturer. Another computer and electronics producer said, “Tariffs continue to cause confusion and uncertainty for long-term procurement decisions. The situation remains too volatile to firmly put such plans into place.”
“The word that best describes the current market outlook is ‘uncertainty.’ The erratic trade policy with on-again/off-again tariffs has led to price uncertainty for customers, who appear to be prepared to hold off large capital purchases until stability returns,” a transportation equipment maker said. “This has resulted in further reductions in customer demand and softening sales for the balance of 2025. Operations has planned additional weeks of downtime at multiple plants to accommodate reduced orders.”
And finally, a general manufacturer outlined its three top challenges and business outlook: “The geopolitical environment remains volatile: (1) ongoing shifts in U.S. tariff policy make it difficult to plan, (2) emerging conflicts in the Middle East could pose long-term commodity risks and (3) China measures on rare earth materials are causing challenges. Overall outlook for our company is positive; it’s just extremely hard to make near-term supply plans/strategies or budgets.”
