SACRAMENTO, United States, July 1 (Xinhua) -- U.S. manufacturing activity contracted for the fourth consecutive month in June, with new factory orders plummeting amid escalating trade tensions and soaring input costs that continued to weigh on the world's largest economy, while the automotive sector showed similar signs of strain after a tariff-driven sales surge had collapsed.

"The Manufacturing Purchasing Managers' Index (PMI) registered 49 percent in June, a 0.5-percentage point increase compared to the 48.5 percent recorded in May," said Susan Spence, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee, in a press release. It was still below the critical 50 percent threshold that separates growth from contraction, according to data released Tuesday.

The persistent weakness in U.S. industrial backbone reflected broader economic headwinds as trade disputes continued to disrupt global supply chains while manufacturers grappled with sustained price pressures.

Raw material costs have surged for eight consecutive months, with the ISM Prices Index hitting 69.4 percent in May, according to the previous month's data.

The manufacturing downturn coincided with a dramatic collapse in automotive sales momentum. "The springtime surge in U.S. auto sales landed with a thud last month, setting up a slowdown in the months ahead as carmakers digest President Donald Trump's tariffs on auto imports and consumers find fewer deals," Bloomberg reported Tuesday.

"The party is over," Jonathan Smoke, chief economist for researcher Cox Automotive Inc., said in a Bloomberg interview. "It's clearly slowing. It's because of affordability getting worse and forcing what we think will be production declines to keep supply in balance."

The automotive sector's sudden reversal illustrated the broader economic impact of trade policies. The annual automotive selling rate likely fell to 15 million in June -- the slowest pace in the last 12 months -- from 17.6 million in April as consumers pulled back from major purchases.

Shoppers rushed to showrooms as beating tariff-induced price increases became a motivation to buy, pushing up second-quarter sales an estimated 2.5 percent from the prior-year period, according to industry researcher J.D. Power. However, that momentum has now evaporated.

New orders in manufacturing, a key indicator of future production, fell for the fifth straight month to 46.4 percent in June, down 1.2 percentage points from May's already weak 47.6 percent reading. The employment situation in manufacturing has also remained challenging as companies adjust to reduced demand and elevated operating costs.

The automotive industry exemplified these broader manufacturing challenges. Ford Motor Company's second-quarter sales jumped 14.2 percent, helped by employee pricing programs, though growth moderated in June. Hyundai Motor Company reported 10 percent second-quarter growth but only a 3 percent gain in June, down sharply from April's 19 percent surge, according to Bloomberg data.

"These tariffs are already hitting the U.S. auto industry," said Adam Posen, president of the Peterson Institute for International Economics, describing the policies as "inflationary, if not stagflationary."

According to J.D. Power, average monthly car payments reached a record 747 U.S. dollars in June, up 22 dollars from a year ago. That has more people stretching car loans to 84 months, which accounted for 12 percent of all auto financing last month, up three percentage points from last year.

"Given the impact of tariffs, prices are likely to start rising at a much faster rate," Charlie Chesbrough, senior economist for Cox said in a press release on June 25. "Higher vehicle prices are coming to the new vehicle market."

Consulting firm AlixPartners predicted automakers will pass along 80 percent of Trump's tariff costs to consumers, driving up prices by nearly 2,000 dollars per car, though the firm expected the full impact won't be felt until year-end.

Manufacturing companies are feeling similar pressures from multiple directions. The Prices Index recorded its highest readings since June 2022, with companies reporting significant increases in aluminum, copper, steel, electrical components, and plastic resin costs, according to earlier ISM reports.

Supply chain executives surveyed by the ISM reported mixed conditions across different sectors. Only three of the six largest manufacturing industries (Petroleum & Coal Products; Food, Beverage & Tobacco Products; and Computer & Electronic Products) reported increased new orders in June.

The ISM's analysis suggested the June manufacturing reading "corresponds to a change of plus-1.9 percent in real gross domestic product on an annualized basis," according to Spence's statement. This indicated that while manufacturing faces headwinds, the sector's performance would still support modest economic growth.

The June slowdown was "a hangover from some of the sales that were pulled ahead," said Mark Wakefield, global auto market lead for consultant AlixPartners. ■