Input Stories

In June, Texas factory activity held relatively steady following slight growth in May. The production index rose just 0.4 points to 1.3, indicating mild growth. The new orders index remained negative but improved, rising to -7.3 from -8.7 in May. The capacity utilization index also increased but remained negative, up 0.5 points to -1.0, while the shipments index turned negative, decreasing nearly eight points to -7.3.

Perceptions of manufacturing business conditions continued to worsen in June but at a slower rate of decline than the prior month, with the general business activity index rising 2.6 points to -12.7. The company outlook index also improved while remaining negative, increasing to -8.9 from -11.3. Meanwhile, the outlook uncertainty index, which has been volatile in recent months, advanced further in June, ticking up 2.5 points to 15.2. The series average is 17.2.

Labor market indicators suggested an increase in head counts and shorter workweeks in June, with the employment index rising 2.2 points to 5.7, while the hours worked index retreated further into negative territory to -8.4. Nearly 18% of firms reported net hiring, while a smaller percentage (12.1%) noted net layoffs.

Historically high upward pressure on prices worsened in June, while wage growth remained relatively stable. The prices paid for raw materials index increased slightly, from 40.7 to 43.0. Meanwhile, the prices paid for finished goods index jumped 11 points to 26.1, three times the series average. On the other hand, the wages and benefits index slipped from 15.0 to 13.4, below the series average of 21.1.

The outlook for future manufacturing activity softened from May, with the future production index falling from 31.1 to 22.6. Meanwhile, the future general business activity index and the future company outlook index both improved significantly, rising 13.1 points and 10.8 points to 14.4 and 16.4, respectively.

New orders for manufactured goods rose 8.2% in May, up five of the past six months and 3.2% over the year. When excluding transportation, new orders inched up just 0.2%. Orders for durable goods leaped 16.4%, following a 6.6% decrease in April. Year to date, durable goods orders are up 6.9%. Nondurable goods orders ticked up 0.1% in May after declining 1.0% in April. Nondurable goods orders are down 0.3% over the year.

New orders for nondefense aircraft and parts, which have been incredibly volatile in recent months, led the increase in durable goods, climbing 230.8%, following April’s 51.6% dive. In May, the largest monthly decrease occurred in mining, oil field, and gas field machinery, which fell 11.5%, after jumping 21.0% the month prior. The largest over-the-year changes also occurred in nondefense aircraft and parts (up 163.6%) and defense search and navigation equipment (down 8.2%).

Factory shipments increased 0.1% in May, after slipping 0.3% in April. Shipments over the year rose 0.7%. Shipments excluding transportation also ticked up 0.1% in May, following a 0.7% decrease the previous month. Shipments for durable goods improved 0.2% in May, following a 0.3% increase in April, and are up 1.8% year to date. Meanwhile, nondurable goods shipments recovered just 0.1% from the prior month’s 1.0% decline and are down 0.3% year to date.

Unfilled orders for all manufacturing industries rose 3.4% in May, after being flat in April. Inventories ticked up 0.1%, the same as four of the past five months, and the inventories-to-shipments ratio remained the same at 1.58. The unfilled orders-to-shipments ratio for durable goods increased to 6.98 from 6.77 in April.

The S&P Global U.S. Manufacturing PMI was 52.9 in June, improving to the highest reading in more than three years and the sixth consecutive month of growth. New orders also increased for the sixth successive month as a result of improved domestic and international demand, resulting in production rising for the first time in four months. Tariffs led to steep increases in both input and output costs in June, rising at the quickest rate in nearly three years. Nevertheless, manufacturers bought inputs at the fastest pace since April 2022 in an effort to build up inventory amid ongoing trade and price uncertainty.

Strengthened international demand led to an increase in new export orders, albeit the growth was limited by tariffs. The rise in input purchases helped drive an increase in inventory. On the other hand, because inventory growth has risen at such a steep pace to protect against supply-side disruptions from tariffs, growth is likely to be slower in the second half of the year. Increased input costs were connected widely to higher tariff rates, especially for steel, resulting in the sharp hikes in output charges.

Meanwhile, business confidence about the year ahead improved to the highest reading in four months, with firms hopeful that trade uncertainty will improve as the deadline for paused tariffs draws nearer. Improved sentiment, in conjunction with rising production, led to employment rising at the fastest pace in two-and-a-half years in June, with additional staffing capacity needed, as backlogs increased for the first time since September 2022.

In June, global manufacturing activity stabilized, rising from 49.5 to 50.3. Output and new orders returned to growth in June, pushing up the PMI. New export orders continued to decline but at a slower pace than the prior month. Nevertheless, the outlook remained subdued, with the level of positive sentiment unchanged from May and below the survey’s long-run average.

India, Ireland, Greece and the U.S. had the highest PMI readings in June. On the other hand, the U.K., Brazil, Mexico and Russia were some of the larger nations to register declines in activity. The rise in manufacturing output was seen across the consumer, intermediate goods and investment goods categories, with growth strongest in the latter two categories.

Additionally, manufacturing employment fell for the 11th consecutive month in June but at the slowest rate since August 2024. Although staffing levels rose in the U.S., Japan and India, they sank notably in China, the Eurozone and the U.K. Meanwhile, price pressures diverged, with the U.S. experiencing sharp increases in both input and output costs. In contrast, average prices fell in mainland China and the Eurozone, and prices were subdued elsewhere.

Job openings for manufacturing increased by 22,000, from 392,000 in April to 414,000 in May. Furthermore, the April job openings level of 392,000 was revised upward from 381,000 in the previous report. Nondurable goods job openings in May declined by 10,000 to 125,000, while durable goods job openings rose by 32,000, from 257,000 in April to 289,000 in May. The manufacturing job openings rate inched up to 3.1% from 3.0% in April but fell from 4.3% the previous year. The rate for nondurable goods manufacturing slipped 0.2% to 2.5%, while it advanced 0.4% to 3.5% for durable goods.

In the larger economy, the number of job openings rose to 7.8 million, an increase of 374,000 from the previous month but a decrease of 132,000 from the previous year. The job openings rate ticked up to 4.6%, up from 4.4% in April but down from 4.8% last year. This data reflects an overall labor market that has eased back to pre-pandemic levels, but remains strong and relatively tight from a historical perspective.

The number of hires in the overall economy decreased 112,000 to 5.5 million in May and 70,000 from the previous year. The hires rate for the overall economy edged down 0.1% in May to 3.4%. Meanwhile, the hires rate for manufacturing declined 0.4% in May to 2.2%. The hires rate for durable and nondurable goods similarly dropped 0.4% to 2.0% and 2.4%, respectively.

In the larger economy, total separations, which include quits, layoffs, discharges and other separations, edged down 71,000 from April to 5.2 million and 72,000 from the previous year. The total separations rate stayed the same at 3.3% for the overall economy but declined 0.3% for manufacturing to 2.2%. Within that rate, layoffs and discharges decreased by 5,000 in May for manufacturing, while quits dropped by 27,000. The quit and layoff rates continue to remain significantly lower for manufacturing than the total nonfarm sector.

Nonfarm payroll employment increased by 147,000 in June, beating expectations. Meanwhile, May and April’s job gains were revised upward by a combined 16,000 to 144,000 and 158,000, respectively. The 12-month average stands at 146,000 job gains per month. The unemployment rate edged down 0.1% to 4.1%, while the labor force participation rate similarly inched down 0.1% to 62.3%.

Manufacturing employment slipped by 7,000, but the May loss of 8,000 was revised upward slightly by 1,000 jobs to a decrease of 7,000. Durable goods manufacturing employment fell by 5,000, while nondurable goods employment declined by 2,000. The most significant gain in manufacturing in June occurred in paper manufacturing, which added 2,300 jobs over the month. Meanwhile, the most significant losses occurred in computer and electronic product manufacturing, which shed 4,900 jobs over the month, followed by plastics and rubber products manufacturing, which lost 3,400 jobs.

The employment-population ratio stayed the same at 59.7% and is down 0.3 percentage points from a year ago. Employed persons who are part-time workers for economic reasons decreased by 159,000 to 4.50 million but are up from 4.23 million in June 2024. Native-born employment is up 830,000 over the month and 1,746,000 over the year. Meanwhile, foreign-born employment is down 348,000 over the month but up 364,000 over the year.

Average hourly earnings for all private nonfarm payroll employees rose 0.2%, or 8 cents, reaching $36.30. Over the past year, earnings have grown 3.7%. The average workweek for all employees edged down by 0.1 hour at 34.2 hours but stayed the same for manufacturing employees at 40.1 hours.

Existing home sales increased 0.8% in May but declined 0.7% from May 2024. Housing inventory grew to 1.54 million units, reflecting a 6.2% rise from April and a 20.3% jump from last year. The median existing home price was $422,800, up 1.3% from last year. The Northeast and Midwest registered increases, while the South and West posted declines.

Single-family home sales rose 1.1% in May and 0.3% over the year, with the median price increasing 1.3% from May 2024 to $427,800. Condo and co-op sales slipped 2.7% to 360,000 units in May and fell 10.0% from last year. Meanwhile, the median price rose 0.7% from the prior year to $371,300.

Homes were typically on the market for 27 days in May, down from 29 days in April but up from 24 days in May 2024. First-time buyers made up 30% of sales in May, down from 34% in April and 31% at the same time last year.

In April, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index recorded a 2.7% annual gain, down slightly from 3.4% in March. The 10-City Composite saw an annual increase of 4.1% in April, down from 4.8% the previous month, while the 20-City Composite rose 3.4% year-over-year, down from 4.1%. Among the 20 cities, New York again posted the highest annual gain at 7.9%, followed by Chicago at 6.0% and Detroit at 5.5%. Tampa again recorded the lowest annual return, with prices falling 2.2%.

On a month-over-month basis, the U.S. National Index rose 0.6%, while the 10-City and 20-City Composites both increased 0.7% before seasonal adjustment. Meanwhile, after seasonal adjustment, the National Index posted a decrease of 0.4%, while the 20-City and 10-City Composites decreased 0.3%. The differences between raw and seasonally adjusted figures reveal the pressure affordability is putting on expected seasonal patterns. Detroit (+1.5%), Boston (+1.5%) and New York (+1.2%) led monthly price gains, while only Los Angeles (-0.1%) and Phoenix (-0.04%) posted monthly declines.

Affordability constraints hit previously overheated markets hardest in April, while buyers expressed new interest in traditionally stable markets with more reasonable price levels. Mortgage rates continue to hover in the mid-6% range, and monthly payment burdens remain near multi-decade highs relative to incomes, which continue to price out potential buyers. Despite weaker buyer demand, persistent supply shortages are providing a price floor and preventing price corrections.

Consumer confidence decreased 5.4 points in June to 93.0. After increasing sharply last month, the Consumer Confidence Index returned to the downward trend from the prior five consecutive months and erased nearly half of May’s gain. All three components of the index weakened, with the largest decrease in the Present Situation Index, which measures consumers’ assessment of current business and labor market conditions. The decline in confidence was shared by all age groups and almost all income groups. Additionally, the survey registered declines in all political groups, with the largest decline among Republicans.

The Present Situation Index, reflecting current business and labor market conditions, fell 6.4 points to 129.1. Meanwhile, the Expectations Index, which reflects consumers’ short-term outlook for income, business and labor market conditions, slipped 4.6 points to 69.0, still below the recession signal threshold of 80.

Views of the current labor market situation are still poor, with 29.2% of consumers saying jobs were “plentiful,” down from May (31.1%), while 18.1% said jobs were “hard to get,” down slightly from 18.4% the prior month. Looking to the future, 25.9% anticipate fewer available jobs in the next six months, down slightly from 26.2% the prior month. Additionally, expectations about future income declined from May, with 16.3% of respondents anticipating increases compared to 12.4% expecting decreases.

Although inflation and high prices remained an important concern in June, more consumers mentioned easing inflation, contributing to inflation expectations edging down from 6.4% in May to 6.0% in June. Mentions of tariffs were still prevalent in written responses, with consumers expressing fears of negative impacts on the economy and prices. References to geopolitics and social unrest increased but were still relatively low on consumers’ list of concerns.

Buying plans for cars stayed the same at the highest level since December 2024, but plans for purchasing homes declined. More consumers were undecided about buying big-ticket items than in May. Meanwhile, 57% of consumers expect interest rates to rise, the highest proportion since October 2023. Overall, consumers’ views of their current financial situation deteriorated slightly from May but remained solid.

Manufacturing activity in the Fifth District contracted in June, but at a slower pace than the previous month, with the composite manufacturing index ticking up from -9 to -7. Additionally, the local business conditions index improved but remained in negative territory, rising from -25 in May to -20 in June. On the other hand, manufacturers are more pessimistic about the future, with the outlook for future local business conditions slipping from -6 in May to -11 this month. The Fifth Federal Reserve District consists of Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia.

Among its components, shipments and new orders improved but remained negative, rising from -10 to -3 and from -14 to -12, respectively. Employment soured slightly, falling from -2 to -5, indicating hiring decreased at a faster rate in June. The vendor lead time index remained largely unchanged at 16, after jumping from 1 to 15 in May. The share of firms reporting backlogs edged down from -19 to -20. The average growth rates of prices paid and prices received both jumped in June.

Looking ahead, firms still expect both price indexes to rise in the next 12 months but at a slower pace than forecasted in May. Expectations for future shipments ticked up from 2 to 4, and new orders rose out of negative territory from -3 to 5. Expectations for backlogs also improved, moving from -27 to -21. Meanwhile, firms continued a cautious approach to equipment and software spending, with expectations worsening from -13 to -19. Expectations for spending on capital expenditures also deteriorated to -20. In sum, businesses in the Fifth District are cautiously optimistic about prospects for future growth but are still avoiding making new investment plans.