Manufacturing Downturn: What Does Recovery Look Like?

Right now the US is experiencing a slump in the manufacturing sector. The downturn has many factors stemming from the trade war. However, there is more to the picture than just trade wars and tariffs. Consider the downturn of the manufacturing industry in terms of the whole economic scene in order to understand the potential for manufacturing recovery.

Biggest Drop in ISM in Decade

According to Industry Week, the economy has fallen 47.8 points on the Institute for Supply Management index. Furthermore, this is the lowest that the index has been since June 2009. However, the real picture is more complex as you would expect with a globally connected economy. Timothy R. Fiore, Institute for Supply Management (ISM), said in the Washington Post, “Global trade remains the most significant issue, as demonstrated by the contraction in new export orders that began in July 2019.”

Manufacturing Downturn

While most economists state that manufacturing is only about one-tenth of the total US economy, the government uses a different data analysis. With the Manufacturers Alliance for Productivity and Innovation, manufacturing is actually more toward one-third of the US gross domestic product (GDP). Industry Week states the actual downstream value of the manufacturing economy should be more pressing in matters for policymakers and economists.

Certain states including Ohio, Wisconsin, Michigan, and Pennsylvania all have large manufacturing industries, making these the states to watch in terms of a manufacturing recovery. This also makes these the states to watch when it comes to political moves in the coming terms, as a result of the manufacturing downturn/recovery process.

Manufacturing Recovery

While new orders and production, as well as exported goods, were down in September among manufacturers, China is also experiencing a weakened economy. This is a result of the trade war that is increasing the expense of importing parts from China for US production. So what about a manufacturing recovery here in North America and the US specifically? Barron’s reported back in April 2019 that there was a stall in the recovery of the manufacturing sector.

However, Industrial Distribution gives more promise with encouraging subsectors. Aerospace, computer and electronic products, machinery, and chemicals all have strengthened in some aspects. The computer and electronic products subsector, for example, is expecting to see an average economic growth of 4.8 percent from 2018 to 2021. The aerospace subsector is even more promising with 5.6 percent growth in the same period. Machinery is expected to gain 4.3 percent while the chemical subsector forecasts 3.8 percent annual growth.

To find out more about the latest economic gains and slumps, and how you should be preparing for the future economy, ENGS Commercial Capital has the right resources for your SMB.