US factory activity contracted for an eighth month in June, slipping to the weakest level in more than three years as production, employment and input prices retreated.

The Institute for Supply Management's manufacturing gauge fell to 46, the weakest since May 2020, from 46.9 a month earlier, according to data released Monday. The current stretch of readings below 50, which indicates shrinking activity, is the longest since 2008-2009.

The decline in the ISM production gauge, which also stands at the lowest level since May 2020, suggests demand for merchandise remains weak. The index of new orders contracted for the 10th straight month and order backlogs shrank, which may help explain a pullback in a measure of manufacturing employment.

The ISM gauge retreated to a three-month low and, at 48.1, indicates fewer producers adding to payrolls.

Many Americans continue to limit their spending on merchandise as they rotate to services and experiences. Others are simply tightening their belts as still-high inflation takes a toll on their incomes.

At the same time, recent government data showed business demand for equipment remains healthy and, if sustained, could provide some support for manufacturers.

Moreover, the ISM's gauge of customer stockpiles shrank at the fastest pace since October, while the index of factory inventories dropped to the lowest level since 2014.

Producers are also finding relief in declining commodities prices. The group's index of prices paid for materials slid to 41.8, the lowest this year.

The report corroborates other data showing a struggling manufacturing sector. Regional surveys from the Federal Reserve banks of Dallas, Richmond and Philadelphia all painted a pessimistic picture.

Source : Bloomberg