So far in 2023, the flow of economic data has been a story of ups and downs: first, with several weeks of signs of a slowing economy and falling inflation, then several weeks of data suggesting that the boom times were still here.
Driving the news: The Institute for Supply Management’s manufacturing activity fell to 46.3, the lowest since May 2020’s 47.7. Numbers below 50 indicate contraction, and according to this index, manufacturing has contracted for four consecutive months.
- The fall was even more pronounced in some key forward-looking ISM components, including sharp declines in new orders, inventories and employment.
Why is this important: The survey is the latest confirmation that the economy It’s true emerging from the strong boil of 2022, despite a still-robust labor market and other signs of strength.
Between the lines: At the moment, the details of the ISM data do not look so much recessive, but more like a healthier balance in the manufacturing sector. This resulted in a sharp decline in reported price pressures, which fell below 50, and lower backlogs and inventories.
- At the same time, several categories of goods are experiencing persistent shortages, including electronic components.
What they say : “New orders are starting to decline and supplier shipments are improving slightly,” said an electrical equipment maker who participated in the survey. “This allows us to reduce [our] backlog and create a buffer in certain categories.”
- “Supply chain disruption – particularly in electronics – is still significant compared to pre-pandemic conditions,” the respondent said.
- “Slightly lower sales and reduced budgets with a greater focus on savings,” said a chemical manufacturer.
To note : “We are closely monitoring the global banking situation, but no impact has been seen or is expected at this time,” said a maker of miscellaneous goods.
The bottom line: “The slowdown in demand for goods has cleared the way for manufacturers to cut payrolls and ease production schedules – the combined effect of which is clear as the manufacturing malaise spreads,” said Jim Baird, chief operating officer. investments of Plante Moran Financial Advisors, in a note.