By Xavier Fontdegloria

Factory activity in the U.S. lost further momentum in June as output stalled and new orders contracted amid weaker client demand, data from a purchasing managers survey showed Friday.

The S&P Global U.S. manufacturing PMI fell to 52.7 in June from 57.0 in May, slightly above the preliminary reading of 52.4, signaling that factory activity grew at its slowest pace in almost two years. A reading above 50.0 points to an expansion in activity, while a figure below that threshold points to a contraction.

Economists polled by The Wall Street Journal expected the PMI to come in at 52.0.

The data suggest that the manufacturing sector is acting as a drag on economic growth and this is likely to intensify in the summer, said Chris Williamson, chief business economist at S&P Global.

"Forward-looking indicators such as business expectations, new order inflows, backlogs of work and purchasing of inputs have all deteriorated markedly to suggest an increased risk of an industrial downturn," he said.

The drop in the index was driven mainly by a decline in new orders for manufacturing firms, the first decrease in more than two years. Firms reported that inflationary pressures, weak client confidence in the outlook and supply-chain disruptions drove the decline, S&P Global said.

The decline in demand eased some pressure from supply chains and prices, according to the survey. Average supplier delivery times lengthened to the smallest extent since November 2020, while input and output inflation moderated.

"Some welcome news is that the drop in demand for inputs has brought some pressure off supply chains and calmed prices for a wide variety of goods, which should help alleviate broader inflationary pressures in coming months," Mr. Williamson said.

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com

(END) Dow Jones Newswires

July 01, 2022 10:13 ET (14:13 GMT)

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