June PMI at 62.1, unchanged from May levels

June PMITM data from IHS Markit signalled the joint-fastest
improvement in the health of the U.S. manufacturing sector on
record. The upturn was supported by further marked expansions in
output and new orders, but supply chain disruptions worsened and
weighed on production capacity. Vendor performance deteriorated
to the greatest extent on record. Input costs meanwhile showed the
largest jump on record, feeding through to another record rise in
factory selling prices.

Hopes of a sustained period of strong client demand strengthened
output expectations, as the degree of confidence reached a sevenmonth
high.

The seasonally adjusted IHS Markit U.S. Manufacturing Purchasing
Managers’ Index™ (PMI™) posted 62.1 in June, unchanged on May,
but slipping slightly from the earlier released 'flash' estimate of
62.6. The marked improvement in operating conditions was the
joint-strongest since data collection began in May 2007.

New orders growth remained substantial in June, despite the rate
of expansion easing from May's historic high. The pace of increase
was the second-fastest on record, with firms continuing to note
marked upturns in demand from both new and existing clients.
Some companies also stated that the further relaxation of COVID-19
restrictions encouraged customers to expand their activity. New
export orders meanwhile rose solidly in June, albeit at the softest
pace for three months.

Output growth, however, was weighed down by ongoing and
severe supply-chain disruptions, and reports of labour shortages.
Although the rate of growth was among the sharpest since May
2007, firms noted difficulties processing new orders amid material
delivery delays and challenges finding suitable candidates for
current vacancies.

Suppliers' delivery times lengthened to the greatest extent on
record in June, as component shortages and transportation issues
exacerbated supply-chain woes. Subsequently, vendors hiked their

charges. Input costs rose at the fastest pace since data collection for
the series began in May 2007, as greater global demand for inputs
put pressure on material shortages. 

Manufacturers were able to partially pass on higher costs to clients,
however, as the rate of charge inflation matched May's historic
peak. Firms overwhelmingly linked the uptick in selling prices to
greater cost burdens.

Raw material shortages and strong growth in new orders led to a
sharp expansion in input buying at the end of the second quarter.
Goods producers registered the second-fastest rise in purchasing
since August 2014, which in turn drove a solid increase in preproduction
inventories. At the same time, stocks of finished goods
were utilised to fulfill new orders and fell at the steepest rate for
just over a year.

Meanwhile, manufacturing firms indicated a solid rise in
employment during June. The rate of job creation was the slowest
for six months, however, as companies reported difficulties enticing
workers back. Labour shortages exacerbated pressure on capacity,
as backlogs of work rose at one of the steepest rates on record.

Finally, goods producers registered the strongest degree of
optimism regarding the outlook for output for seven months.
Confidence reportedly stemmed from hopes of a sustained period
of strong client demand, and more consistent vendor performance
going forward.