US factory activity grew for a sixth straight month in June, but at a slower pace. The ISM manufacturing index slipped to 53.3% from 54.0% in May.
The more important number was prices. The index tracking what factories pay for materials fell 9.1 points to 73.0%, its steepest one-month drop since July 2022. It came as suppliers started delivering faster.
High costs and long lead times push buyers to order early and pay more. In June, both eased at once for the first time this cycle.
What's behind it: A reading above 50 still means prices are rising, so 73.0% isn’t cheap. But it is well below May’s 82.1%. June also brought the first real list of materials that fell in price during this cycle, including corn, crude oil and some aluminum.
The supplier deliveries index, where a lower reading means faster shipping, fell 3.2 points to 57.4%.
Much of the relief traces to the fading war premium. Mentions of the Iran war fell to 31% of survey comments from 42%. One manufacturer said suppliers in Europe and India had stopped charging energy surcharges.
“The sharp decline in the prices index is the most positive signal in the report,” wrote TD Economics’ Vikram Rai. He said the drop in delivery times suggests “the worst of price pressures and supply chain disruptions may be behind us.”
The catch: The relief is mostly for companies buying at home. New export orders slipped back into contraction at 48.5%, so manufacturers selling abroad still face softer demand even as their costs ease.
What's next: July’s report will show whether the price break holds or was a one-month reaction to the cooling conflict. Lead times for production materials are still 84 days, up three from May, so the improvement hasn't fully reached the factory floor yet.
