Manufacturing Stock Performance Is Slumping in 2022
If you’ve been following the stock market so far this year, you know the headlines are bleak. Analysts are still hesitant to use the word “recession” or label the current situation a “bear market,” but all signs point to the reality of economic contraction. Case in point: The manufacturing sector — a pillar of the domestic economy — is significantly down year to date. As stock market losses mount, they paint a picture of broader economic concerns.
The losses suffered by public companies are a window into the health of the whole sector. As major producers face significant economic headwinds, they represent an industry confronting difficulty across the board.
A look at the market
Since the beginning of 2022, the Dow Jones Industrial Average has been down about 10%. This index is broadly representative of the largest companies in the U.S., with about 15% of the total index attributed to Industrials. While Industrials are also down about 10% as a sector, there is varied performance across different areas of focus.
For example, Energy and Utilities are handily outperforming the market. Both have posted double-digit positive returns year to date, but industrial machinery producers and construction companies are lagging for the same period. Manufacturing is financially turbulent, and there are more difficulties ahead for Industrials compared to other sectors.
Major producers feel the pain
Headlines about manufacturing stocks tend to focus on the largest conglomerates, and the news has not been good.
Companies like General Electric (NYSE: GE) and 3M (NYSE: MMM) are both down more than 10% year to date as they encounter production challenges. Other public producers are also feeling the strain. Companies like Johnson Controls (NYSE: JCI) and Boeing (NYSE: BA) are down between 15% and 30%, showcasing the predicament of manufacturers.
Why are manufacturing stocks slumping?
Manufacturing faces a dilemma. On the supply side, the cost of raw materials and continued supply chain disruptions have thrown production planning into disarray and forced producers to absorb costs they will inevitably pass on to customers. As for demand, continued orders and lack of labor create a perfect storm of inefficiency.
While every manufacturer faces its own challenges in 2022, public companies’ earnings calls have shed light on some of the long-standing predicaments of the entire industry. Inflation, geopolitical tensions, labor shortages, and supply bottlenecks are driving the industry’s inability to keep up with production and meet demand.
The economic challenges of public manufacturing companies are highly visible via the stock market, and it’s clearly an era of turmoil for U.S. manufacturers. Unfortunately, these conditions look likely to continue through the end of this year and into the next.