The Institute for Supply Management’s April Report on Business shows U.S. manufacturing activity sank to a five-month low in April, down 2.5% from March’s reading of 55.3%. Although any reading over 50 indicates expansion, several months of softer readings from the ISM point to a possible slowdown.
However, reports remain mixed for the U.S. manufacturing sector, with a strong GDP report offset by a tepid industrial output report. The ISM shows continued expansion in manufacturing, but the Labor Department shows hiring in the factory sector has slowed (and, in fact, contracted in March).
Adding to this, recent information collected by MNI, compiler and publisher of the industrial data that powers IndustryNet, finds the U.S. construction equipment industry is experiencing rapid growth and a number of new plant openings were announced in April.
MNI reported strong manufacturing employment growth numbers for New Jersey and Rhode Island – states that have traditionally seen factory jobs decline with the rise of the global economy.
U.S. manufacturers are contending with an unprecedented number of uncertainties -- from tariffs, to concerns over supply disruptions at the US/Mexico border, not to mention Brexit. Additionally, finding skilled workers remains a big challenge.
At the same time, 2019 might be described as a turning point for U.S. manufacturing, as more companies look to source supplies domestically, providing opportunity for industrial companies at home.
Today, we’re taking a look at what manufacturing executives are saying directly about business conditions and the road ahead.
Optimism amid uncertainty, a consistent theme among manufacturing executives
“Comments from the panel reflect continued expanded business strength, but at the softest levels since the fourth quarter of 2016.” said ISM Chair Timothy Fiore, in response to the latest reading on manufacturing activity.
Fiore went onto describe that demand expansion was keeping up and customers’ inventories were described as “too low”.
Inputs, Fiore said, which are a combination of supplier deliveries, inventories, and imports hit a higher level “due to inventory growth exceeding consumption.”
Comments from manufacturing executives in the ISM’s April report reveal that a multitude of concerns persist, even as optimism holds steady.
Though trade talks have taken a turn for the worse since the ISM April report was published, tariffs were still a closely-watched factor, with one manufacturer reporting it was reducing its capital spend to 2016 levels in response to tariffs and concerns over a slowing economy.
“[We are] closely watching the Mexico border situation as well as the tariff situation,” said a respondent in the transportation equipment industry.
Another respondent in the machinery industry reported “…Overall, business [is] strong. Monitoring the tariffs and Mexico border issues, which are a potential threat. The China trade agreement getting completed will help with stability with suppliers and costs management.”
“Mexico/U.S. border crossing delays are slowing supplier deliveries,” said one executive in the computer/electronics industry. “Tariffs are resulting in increased prices on computer components, as well as manufacturers moving out of China to countries not impacted by the tariffs. Brexit expected to result in delays on moving product through the United Kingdom.”
Despite the multitude of challenges, an undercurrent of optimism was still expressed by many executives responding the ISM’s survey.
Industries such as primary metals and nonmetallic minerals sector seem to be faring well under the new steel tariffs:
“Order book remains strong,” said an executive in the primary metals sector. “Future outlook is beginning to soften a little.”
“Orders continue to be strong, especially from the steel industry.” (Nonmetallic mineral products)
“Business is steady,” said a respondent in the fabricated metal products. “We expect business to grow throughout the second quarter, then level in the third and fourth quarter.”
For a complete rundown of the ISM report and the week’s industrial headlines, see our post U.S. manufacturing activity slips in April.
Solutions for domestic sourcing
Changing trade policies have a significant impact on American businesses, with many reexamining supply chains and searching for domestic suppliers.
Industrial marketplaces like IndustryNet help industrial buyers connect instantly with suppliers and also provide a direct path for U.S manufacturers to increase their visibility among domestic industrial procurers.
