Employment fell sharply but production contraction slowed. Prices are declining.
Please consider the September 2024 Manufacturing ISM® Report On Business® emphasis mine.
The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee.
U.S. manufacturing activity contracted again in September, and at the same rate compared to last month. Demand continues to be weak, output declined, and inputs stayed accommodative. Demand slowing was reflected by the (1) New Orders Index remaining in contraction territory, (2) New Export Orders Index contracting at a faster rate, (3) Backlog of Orders Index staying in strong contraction territory, and (4) Customers’ Inventories Index indicating customers’ inventories were “about right.”
Output (measured by the Production and Employment indexes) continued in contraction with mixed results: Employment shrunk at a faster rate while production approached expansion, with levels on par compared to August. Panelists cited continuing efforts by their companies to right-size workforces to levels consistent with projected demand. Inputs — defined as supplier deliveries, inventories, prices and imports — generally continued to accommodate future demand growth, with inventories returning to low levels and suppliers showing some difficulty in meeting customer needs.
Demand remains subdued, as companies showed an unwillingness to invest in capital and inventory due to federal monetary policy — which the U.S. Federal Reserve addressed by the time of this report — and election uncertainty. Production execution stabilized in September. Suppliers continue to have capacity, with lead times improving and shortages reappearing. Seventy-seven percent of manufacturing gross domestic product (GDP) contracted in September, up from 65 percent in August.
Respondent Comments
- “North America demand has started to weaken. Asian demand is slightly higher but shows signs of weakness in future months. Comments tied to automotive builds.” [Chemical Products]
- “Global demand continues to remain soft. Fourth-quarter forecasts have been further reduced, with several new programs shifted from 2024 to 2025. Manpower, working capital and supplies are being flexed down in response. The previously anticipated shift from internal combustion engine to electric vehicle (EV) technology has been pushed out due to market response. Long-range plans are being adjusted to incorporate traditional products for longer, while new EV product offerings are being planned for slower rollouts.” [Transportation Equipment]
- “The second half of 2024 is trending upward enough to more than compensate for the year-over-year losses we experienced in the first half. We are anticipating a record sales volume for 2024.” [Food, Beverage & Tobacco Products]
- “The strategy of customer push-outs last year enabled those customers to adapt to the market. Now, while most companies are seeing a slowdown, we are seeing solid growth. The general slowdown in the economy is allowing for prices to continue to stabilize.” [Computer & Electronic Products]
- “A continuing low order rate is resulting in ongoing manufacturing adjustments to balance output with demand.” [Machinery]
- “The fourth quarter is slower than anticipated. We won’t realize the effect of interest rate adjustments with new project starts until the first quarter of 2025.” [Fabricated Metal Products]
- “Business is flat. Waiting for interest rates to drop and the election outcome in November before we confirm our 2025 plans. Currently planning on a flat 2025.” [Furniture & Related Products]
- “Our sales continue to be flat. Our customers are telling us that although our products perform very well, they are forced to seek lower-cost components to maintain their sales.” [Textile Mills]
- “Sales have slowed this quarter compared to the same time period last year. Adjusting production accordingly.” [Miscellaneous Manufacturing]
- “Still hiring to fill vacant positions in production/management. Not adding new jobs. Automotive original equipment manufacturers (OEMs) are starting to slow or cancel orders. The pace is slowing.” [Primary Metals]
This is an important report that has regularly been in contraction. Manufacturing is a wealth building activity and wealth along with wealth building is required to support consumption which as the word consume implies, consumes wealth. With consumption becoming an ever larger component of our overall economy it becomes more difficult for the wealth creation component to keep up, thus we go broke as a nation.
The inflationary depression is setting in even faster now. Inflation still coming on will bring shortages. Kicking out the dems would be a step in the right direction, but the wreckage will outpace any recovery for a long time yet.
Port strike, Boeing strike (pending), missiles flying, oil up 5%, gold up, treasury yields down, it’s getting pretty chaotic out there…..A.B.P.
Don’t forget the massive damage from Helene in the Carolina’s, Georgia and Tennessee. It will be months to years before some of those areas are producing anything again and all the while they are consuming via the rebuilding process.
Oh I haven’t forgotten, those poor red state souls won’t be able to vote this election 😉
First 100 missiles from Iran to Israel
Austrian theory tells us that recessions happen as the symptom when malinvestment is recognized and fixed. All those workers doing malwork lose their jobs and are available to be hired for more productive work.
During this we all have a worry whether we will get a next job. The Greens aggravate this because they think so much materialism and indulgence is mal-investment and mal-work. Which is why greens are also socialists = for the sake of the planet everyone gets less, and that less is distributed “equally”. Greens are in control of a lot of our government.
Years ago I saw in the Wall Street Journal an article describing the life of a Japanese worker whose life got hard up. He began spending his evenings growing a garden. Vegetables I presume. When he realized that using tap water to irrigate his garden cost him money he switched to fetching water from a creek. His wife began checking their electric meter each day. Soon she tossed out the TV in their son’s room. Life as it develops in an impoverishing economy. I really regret that I did not note the day and page number of that article.
The same era I saw an article about the depression Japanese banks were in. The amount they could earn lending out deposits was shockingly low, like on the order of $50 a month from a loan of $1 million. It was so bad that banks would sometimes deposit money into a competitor bank. … which elicited howls of outrage when that competitor bank discovered it. Again, I regret that I did not note the day and page number of the article.
We deal in trading paper, friend.
Thanks Mish. Your reports and analysis are really quite outstanding
Export orders are down because Chinese ghost city real estate collapse wiped out middle class Chinese life savings. Previously a young man could not marry unless he owned a ghost apartment. European industry cannot compete because of high wages, high taxes, garish regulations, and expensive green energy. All European energy intense industries must bankrupt or relocate out of Europe. USA is doing fine but our export customers are flat broke.
US unemployment is hovering around 4% a very healthy number even if unemployment is increasing. Yes, those are low paid do nothing gig jobs and part time jobs until we reelect Donald Trump for the third time. Only The Donald can repatriate manufacturing jobs to the USA.
LG just expanded their new plant in SW Poland Batteries production Electricity isn’t too bad in Poland Coal fired predomininately
The polacks might be able to get cheap gas again from Russia if they start acting right. Get rid of Anne Appelbaums’s husband.
I believe the proper term would be Polish.
LG is just a minor player in battery business, but it just highlights the fact that battery production is a East Asian monopoly.