US ISM Manufacturing Index (Jun. 2026)

ISM points to easing price pressures

The slight fall in the ISM Manufacturing Index in June doesn’t change the fact that the sector has generally been resilient since the start of the Iran war. And with oil prices back around their pre-Iran war levels, the prices paid index – which fell in June – probably has further to fall.

Although the headline index fell to 53.3 from 54.0 in May, that still left it above the 50 no-change mark for the sixth consecutive month. The fall was driven by a 2.1 point decline in the production index and a 0.8 point decline in the new orders index. The latter could reflect reduced stockpiling by firms which been trying to get ahead of any potential supply chain disruptions caused by the war. Indeed, the suppliers’ deliver times index fell to 57.4, marking its lowest level since the war started. Meanwhile, the employment index rose to its highest level in 17 months and suggests that employment in the sector rose in May – but it remains quite weak by historical standards.

The prices paid index fell back sharply to 73.0 from 82.1 on the back of lower oil prices and points to headline inflation falling from here. Indeed, while many firms remarked that oil and other commodity prices remained elevated due to the war, one respondent in the petroleum and coal products sector said that “With the potential ending of the Iran war, management is expecting us to go back to February pricing structures and plans”. This will provide some comfort for the Fed, as it suggests that second-round inflation effects from the war have been averted.