Contraction Continues for the U.S. Manufacturing Economy in October 2019 Manufacturing ISM® Report On Business®

The downward slide of the manufacturing economy continues in the latest Manufacturing ISM® Report On Business®. October’s numbers show contraction across the board; however, many are up from September’s report. This slight blip still registers in contraction territory but signals a slowdown to the rapid contraction rates projected after the industry crossed the threshold in late August.

The overall PMI itself is up half a percent, to 48.3%, driven by gains in new orders (+1.8%) and export orders (+9.4%). These major positives are flanked by another glimmer of hope — a decrease in materials prices, which fell 4.2%. Employment and inventories also rose for the month. According to the report, two of the 10 metrics measured by the ISM have crawled back into expansion territory, albeit not enough to move the total PMI.

Beyond the flicker of hope in some key metrics, the ISM continues to be lackluster. Out of the 18 total sectors measured by the report in October, 12 fell. Executive sentiment across the industry shows concern about the stability of the manufacturing economy headed into the fourth quarter:

“Customer demand is down, and we are expecting a very soft fourth quarter, without much relief in sight for Q1. Suppliers report the continued rise in labor costs, which are ultimately reflected in the rising product costs.” Computer & Electronic Products

“Our business levels have softened over the last three to five months, in the U.S. market [and] globally. Germany and China are both experiencing similar slowdowns. We are in the industrial industry, and the outlook appears to remain soft into Q1 of 2020.” Electrical Equipment, Appliances, & Components

As has been the story for the better part of the year, trade wars and global economic slowdown continue to dominate manufacturing headlines. Continuing uncertainty about Brexit, slowdown in major European economies, and shaky domestic manufacturing are all contributing factors to the contraction throughout the year. There’s no end in sight for these headwinds, and manufacturers have begun tightening their belts and hunkering down.

Many worry that manufacturing’s troubles will bleed into the broader economy. There’s precedent for this fear; however, it’s less likely today than it has ever been. Manufacturing, while a cornerstone of the U.S. economy, doesn’t have the disruptive sway it once did. According to Bloomberg, manufacturing is now the smallest share of the U.S. economy in 72 years – with only about 11% of the total gross domestic product. Manufacturing contraction and eventual recession will play a part in broader economic downturn but are less likely to be the lynchpin than they once were.

The manufacturing economy — and the economy at large — are in for rocky times ahead. Stabilization after tumbling metrics has provided a leveling-off point. While the fourth quarter doesn’t look bright and worldwide headwinds continue blowing, manufacturing at least has a chance to breathe. It’s a moment for industrialists to take a big breath in anticipation of time underwater yet to come.

Despite the contracting manufacturing economy, you can always count on the professionals at Global Electronic Services. Contact us for all your industrial electronic, servo motor, AC and DC motor, hydraulic, and pneumatic needs — and don’t forget to like and follow us on Facebook!