By Kathleen Madigan
U.S. manufacturers ended the second quarter on stable footing,
reporting a strong flow of orders that could help support the
overall economy in coming months.
The Institute for Supply Management said Wednesday that its
purchasing managers' index edged up to 53.5 in June from 52.8 in
May. The index, based on a survey of supply-chain executives, is
back up to its January reading after stalling in the early spring.
A reading above 50 denotes expansion in the sector.
"Manufacturing is over its winter hump," said Ward McCarthy,
chief financial economist at Jefferies, pointing to first-quarter
drags from the bad weather and shipping delays caused by the West
Coast port slowdown. He estimates the economy grew at a 2.7%
annualized rate in the second quarter, which ended Tuesday, after
shrinking 0.2% in the first quarter. "The economy bounced back
nicely in the second quarter," he said.
Bradley J. Holcomb, who oversees the ISM survey, said the
manufacturing sector has turned the corner. "We're in good shape
for the rest of the year," he said. The exception to the better
outlook, he said, were manufacturers selling to the oil-and-gas
drilling industry. Falling oil prices have led energy companies to
cut orders for equipment and supplies.
The ISM report showed factory orders and employment in June
stood at their highest readings since December 2014. The June
production index held close to its solid May level. The export
index showed a small contraction in June, but foreign demand picked
up slightly for the second quarter as a whole after contracting in
the winter. A gain in the ISM employment index suggests employers
were hiring last month "in anticipation for future production, now
that order books are filling up, " Mr. Holcomb said.
Business has been strong at Accumold, a producer of molded
micro-components that go into electronics and medical devices like
hearing aids. In recent years, the company has expanded into an
82,000-square-foot facility in Akeny, Iowa, and since the start of
2015 it added almost 40 workers to its existing staff of 211.
Innovation and product-development spending have propelled
Accumold's growth, said chief executive Roger A. Hargens. "What we
started five years ago is paying off now. And what we invest in now
will pay off three to five years from now," he said. He plans to
expand Accumold's facilities and hire 200 more workers within the
next three years.
He said the firm hasn't seen a big impact from the stronger
dollar despite exporting about 70% of its products. "We have an
expertise that gives us a competitive edge around the world," Mr.
Hargens said.
The ISM's Mr. Holcomb also said foreign customers seem willing
to pay more in their local currencies to get the specialized goods
manufactured in the U.S. "The U.S. is a reliable and great source
of finished products for the world," he said.
Write to Kathleen Madigan at kathleen.madigan@wsj.com