Manufacturing Expands in June Amid Global Unrest

2026-07-07T12:30:00Z

U.S. manufacturing expanded in June, but Middle East conflict impacted raw materials.

U.S. manufacturing activity expanded for a sixth consecutive month in June, although the pace of growth cooled slightly compared to May.

As previously reported, the

Demand and output continued to rise

Despite the macroeconomic moderation, core manufacturing indicators remained in positive territory. The New Orders Index registered 56%, down 0.8 percentage point from May but marking its sixth consecutive month of expansion.

Output also continued to grow, with the Production Index logging its eighth consecutive month of expansion at 52.2%, down 2.1 percentage points from May’s reading.

Susan Spence, chair of the ISM Manufacturing Business Survey Committee, noted the sector’s ongoing resilience, stating, “In June, U.S. manufacturing activity remained in expansion territory, growing at a slightly slower pace as compared to the month before.”

Spence also pointed out that the overall economy continued to expand for 20 consecutive months, and that historically, a June PMI reading of 53.3% corresponds to a 2% annualized increase in real gross domestic product.

Companies were hiring but watching headcount

While production and orders grew at a slower pace, the labor market for manufacturers showed signs of stabilization. The Employment Index registered 49.7% in June, up 1.1 percentage points from May. Although this marked the 33

According to Spence, 36% of survey panelists indicated that managing headcounts remained the norm at their companies, while 64% said they were currently hiring. Spence described this as a “near reversal” from the beginning of the year, when 66% of companies were focused on managing staff levels.

Middle East conflict affected materials and pricing

Inflationary pressures maintained a grip on the industrial sector, though they showed significant signs of easing. The ISM Prices Index registered 73% in June. While this represents a notable 9.1 percentage point decrease from May, it still indicates that raw material prices increased for the 21

Spence attributed this persistent pricing pressure to tariffs on many imported goods, rising steel and aluminum prices affecting the entire value chain, and higher costs for petroleum-based products driven by the ongoing conflict in the Middle East.

In June, the ongoing conflict involving Iran continued to weigh on corporate supply chains, with the war mentioned in 31% of negative panelist comments, compared to 17% for tariffs.

One executive in the chemical products sector said the Iran conflict “has impacted pricing in every category of raw materials,” particularly those with a heavy oil content. Consequently, supply deliveries continued to slow, with the Supplier Deliveries Index registering 57.4%, marking its seventh consecutive month of slower deliveries.

Complex outlook for the second half of 2026

The complex geopolitical landscape and elevated interest rates continue to challenge corporate planning.

One respondent in the computer and electronic products space said overall economic growth remained resilient but was slowing as consumer spending weakened under the weight of higher costs for energy and essential goods. The respondent said this was “reducing demand visibility and increasing cost sensitivity for buyers.”

In June, 66% of panelists’ comments were negative, resulting in a positive-to-negative sentiment ratio of 1-to-1.9. Furthermore, 50% of the panelists cited pricing volatility as a significant issue for their companies.

Despite these escalating hurdles, the manufacturing sector remained resilient, with 14 of the 18 tracked industries reporting growth in June.

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RELATED TOPICS: EMPLOYMENT INVENTORY ISM MIDDLE EAST WAR PRICING SUPPLY CHAIN AND DISTRIBUTION

COMPANIES: COMMERCE DEPARTMENT INSTITUTE FOR SUPPLY MANAGEMENT

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