Core Viewpoint - The US manufacturing sector continues to experience contraction, with the ISM manufacturing index indicating a decline in orders and employment, while inflationary pressures are showing signs of acceleration [1][3]. Group 1: ISM Manufacturing Data - The ISM manufacturing PMI for June is reported at 49, slightly above the expected 48.8 and the previous value of 48.5, with 50 being the threshold for expansion [3]. - The new orders index fell to 46.4, below the expected 48.1 and previous 47.6, marking the largest decline in three months and reflecting ongoing economic slowdown [6]. - The employment index dropped to 45, a three-month low, with expectations at 47.1 and a previous value of 46.8, indicating five consecutive months of contraction in employment [6]. - The prices paid index reached 69.7, close to the highest level since June 2022, with expectations at 69.5 and a previous value of 69.4, highlighting rising raw material costs [6]. - The backlog of orders index decreased by 2.8 points to 44.3, the largest drop in a year, and has been in contraction for 33 consecutive months [6]. Group 2: Employment and Industry Analysis - Weak demand and reduced order backlogs are contributing to the accelerated decline in manufacturing employment, with a significant ratio of comments indicating layoffs compared to hiring [7]. - In June, nine manufacturing sectors experienced growth, with notable increases in apparel, petroleum, and non-metallic mineral products, while six sectors, including textiles and wood products, contracted [7]. - The S&P Global reported a Markit manufacturing PMI final value of 52.9 for June, indicating a recovery in manufacturing output after three months of decline, driven by new orders from domestic and export customers [7]. Group 3: Economic Outlook and Price Pressures - The improvement in manufacturing output may be partially driven by inventory accumulation as companies prepare for potential supply issues and price increases related to tariffs [8]. - There are concerns regarding whether the current price pressures are a short-term adjustment or indicative of persistent inflation returning [8]. - Despite the challenges, business confidence has been recovering since April, with manufacturers feeling more optimistic amid reduced trade and tariff uncertainties [8].

Core Insights - The overall business activity index in Texas manufacturing has significantly declined to -35.8, marking the lowest level since May 2020, with a drop of 19.5 points from the previous month, reflecting increasing pessimism among businesses regarding the economic environment [1] - Despite the weak overall business atmosphere, Texas manufacturing output remained slightly positive in April, with a production index around 5.1, indicating minor expansion [1] - The new orders index plummeted by 20 points to -20.0, reaching a new low for the year, while the capacity utilization index fell to -3.8, and the shipments index turned negative for the first time this year, dropping from 6.1 to -5.5, highlighting weak demand [1] - Companies' outlook on future business conditions has worsened, with the future company outlook index dropping to -28.3, the lowest level since the COVID-19 pandemic, and the uncertainty index rising to 47.1, indicating heightened uncertainty among businesses [1] Employment and Labor Market - The labor market indicators show a slight decline in employment, with the employment index stabilizing at -3.9, where 9% of companies reported net hiring and 13% reported net layoffs [2] - The average work hours index decreased from -2.9 to -6.4, indicating a reduction in average working hours [2] Price and Cost Pressures - Input cost pressures have intensified, with the raw materials price index rising by 11 points to 48.4, the highest level since mid-2022, and the finished goods price index increasing by 9 points to 14.9, above the long-term average [2] - In contrast, the wages and benefits index remained stable at 14.3, slightly below historical averages, suggesting relatively steady wage growth [2] Texas Manufacturing Overview - Texas manufacturing generated approximately $296 billion in output in 2023, accounting for about 11% of the national manufacturing output, ranking second in the U.S. behind California, and leading in manufacturing exports [2] - Texas plays a crucial role in the U.S. refining industry, producing significant amounts of oil and coal products, and contributing over 13% of the nation's chemical product output, as well as more than 10% of non-metallic mineral products [2] Future Outlook - The future business activity index for Texas manufacturing has dropped to -15.2, the lowest level in 2023, indicating ongoing challenges [3] - The future production index, while still positive, decreased by 13 points to 14.8, suggesting a weakening expansion momentum [3] - Most indices reflecting future manufacturing activity remain in the expansion zone but are significantly below historical averages [3]