US manufacturing bouncing back but full recovery seen a ways off still

Manufacturing in the US picked up the tempo significantly last month, but economists were at pains to stress that it was doing so from still "very depressed" levels of activity.

The Institute for Supply Management's Purchasing Managers' Index from a reading of 43.1 to 52.6.

Economists had projected a slightly smaller improvement to 49.0.

Nevertheless, Ian Shepherdson at Pantheon Macroeconomics was at pains to stress that Wednesday's reading overstated the extent of improvement because the PMI measures the speed and direction of changes, not their absolute level.

As he put it: "The headline index is now above its pre-Covid level, but don’t be fooled; this does not mean the sector is now in better shape than before the virus struck."

Driving the rebound in the headline index was a 24.6-point surge in a sub-index for new orders to 56.4, alongside a 24.1 jump in a gauge tracking output to 57.3

The sub-index for employment on the other hand improved from 32.1 to 42.1, meaning that companies were firing fewer people but were still laying off a quite a few.

A sub-index for supplier delivery times meanwhile fell back by 11.1 points to 56.9, revealing an easing of bottlenecks in supply chains.

To take note of, the risk remained that activity would tumble again in the face of the second Covid-19 wave.

"We’re happy that manufacturing activity appears to have risen in June, but a full recovery is a long way off, and we’re worried about the risk of a temporary relapse in the face of the second Covid wave," said Shepherdson.

"For now, though, this is a good-looking print, but there’s less to it than meets the eye."