The Fed’s Beige Book, released on Oct. 18, revealed a broad contraction in manufacturing across the United States, reflecting weaker demand and sluggish production.
Most of the Fed’s 12 districts reported declining manufacturing activity, exacerbated by difficulties in finding qualified workers and, in some cases, persistently weak sales.
The Fed’s data on the manufacturing slump was echoed by the Conference Board’s Leading Economic Index (LEI) report, released on Oct. 21, which recorded a 0.5 percent drop in September—an acceleration from August’s 0.3 percent decline. A significant factor in September’s decline was a sharp decrease in new factory orders, contributing to a 2.6 percent decrease in the index over the past six months.
The LEI, which is designed to forecast economic turning points, points to weak economic growth heading into 2025.
“Weakness in factory new orders continued to be a major drag on the US LEI in September as the global manufacturing slump persists,” Justyna Zabinska-La Monica, a senior manager at the Conference Board, said in a statement. “Overall, the LEI continued to signal uncertainty for economic activity ahead and is consistent with The Conference Board expectation for moderate growth at the close of 2024 and into early 2025.”
The persistent downturn in U.S. manufacturing has become a focal point in the 2024 presidential race.
Meanwhile, economic sentiment has taken a downward turn recently.
Even though inflation has eased since the June 2022 recent peak of 9 percent, the Fed’s Beige Book indicates that many districts reported increasing price sensitivity among inflation-weary consumers. Input costs rose faster than selling prices in September, compressing profit margins and further pressuring U.S. businesses, including manufacturers.
]]>Data from the Federal Reserve, released on Oct. 17, showed a 0.3 percent decline in industrial output, following a downwardly revised 0.3 percent gain in August. Analysts had predicted a smaller drop of 0.2 percent for the month.
According to the Fed, the larger-than-expected decline was due in part to disruptions from Hurricanes Helene and Milton, along with the ongoing Boeing machinists’ strike. The aerospace sector, in particular, took a significant hit, with production of aerospace and miscellaneous transportation equipment falling by 8.3 percent, dragging down the overall index.
The broader picture also looks bleak, with industrial output for the third quarter down 0.6 percent. This aligns with other recent indicators pointing to ongoing challenges in the U.S. manufacturing sector.
The latest S&P Global U.S. Manufacturing PMI, a key survey-based measure, showed the sharpest contraction in factory activity in over a year for September. Factory output and new orders dropped sharply, driven by weakened demand.
“The September PMI survey brings a whole slew of disappointing economic indicators regarding the health of the U.S. economy,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement. “Factories reported the largest monthly drop in production in 15 months in response to a slump in new orders, in turn driving further reductions in employment and input buying as producers scaled back operating capacity.”
The deepening decline in U.S. manufacturing, highlighted by the S&P Global report, was reinforced by the Fed’s latest industrial production data. It showed a 0.4 percent month-over-month fall in manufacturing output for September and a 0.5 percent drop compared with the previous year.
Similarly, the Institute for Supply Management (ISM) reported a contraction in U.S. manufacturing for September, marking the sixth straight monthly decline and the 22nd contraction in the past 23 months. Timothy Fiore, chair of the ISM’s Manufacturing Business Committee, noted that demand remains sluggish, with companies hesitant to invest in capital and inventory.
The ongoing slump in U.S. manufacturing has become a key issue on the presidential campaign trail, with both major candidates offering plans to revive the sector.
Speaking in Michigan in late September, former President Donald Trump vowed to “reclaim America’s manufacturing power,” promising tariffs on foreign imports and pledging to provide domestic manufacturers with lower energy costs, taxes, and regulatory burdens.
]]>The latest S&P Global U.S. Manufacturing PMI, a survey-based monthly overview of factory activity in the United States, fell deeper into recession territory in September, data released on Sept. 23 shows. The manufacturing index slumped to 47.0 in September, down from August’s 47.9 and the lowest in 15 months. Readings below 50 represent a contraction in activity.
The decline signals continued deterioration in business conditions within the manufacturing sector, which has been plagued by weakening demand and falling new orders. In particular, new orders in September fell at their fastest pace since December 2022, as manufacturers struggled with declining export demand and reduced domestic sales.
Slumping employment also made a significant negative contribution to the downbeat manufacturing figures, with job losses accelerating at a pace not seen since June 2020.
“Excluding the pandemic, the decline in factory jobs was the steepest since January 2010 as an increasing number of firms reported the need to reduce operating capacity in line with weak sales,” the S&P Global report states.
Cracks in the labor market were behind the Federal Reserve’s decision last week to deliver a large, 50-basis point interest rate cut, with one Fed official saying on Sept. 23 that he was surprised by the pace of deterioration in employment conditions.
“Progress on inflation and the cooling of the labor market have emerged much more quickly than I imagined at the beginning of the summer,“ Atlanta Federal Reserve President Raphael Bostic, a voting member of the Fed’s interest-rate-setting council, said in comments to the European Economics and Financial Centre. ”In this moment, I envision normalizing monetary policy sooner than I thought would be appropriate even a few months ago.”
The central bank’s rate-setting body, the Federal Open Market Committee (FOMC) of which Bostic is a voting member this year, decided last week to lower rates to within a range of 4.75–5.0 percent.
Markets are fully pricing in another rate cut when the policymaking panel meets again on Nov. 7, with the odds split roughly evenly between a smaller quarter-point cut or another jumbo half-point reduction.
But while central bank officials celebrate inflation falling closer to the Fed’s 2 percent target, Monday’s S&P Global data suggests it may be too soon to declare victory in the fight against high prices.
Inflationary pressures picked up across both goods and services, per the S&P Global report, with the increase driven mostly by rising input costs. Prices charged for goods and services rose at their fastest pace in six months, with service sector costs surging due to wage growth. Input costs in services grew at their highest rate in a year, reflecting increased labor expenses, while manufacturing input cost growth cooled slightly, aided by lower energy prices and fewer supply chain snags.
“The survey’s price gauges meanwhile serve as a warning that, despite the PMI indicating a further deterioration of the hiring trend in September, the FOMC may need to move cautiously in implementing further rate cuts,” Chris Williamson, chief business economist at S&P Global, said in a statement.
In contrast to a deepening slump in manufacturing, service sector activity grew at a solid pace in September, per the S&P Global report. The services business activity index came in at 55.4, a slight decline from August’s 55.7. Relatively robust growth in services helped lift the composite PMI measure—which combines both manufacturing and services—to 54.4 in September, a slight decline from the prior month.
“The early survey indicators for September point to an economy that continues to grow at a solid pace, albeit with a weakened manufacturing sector and intensifying political uncertainty acting as substantial headwinds,” Williamson wrote, while partly blaming election-related uncertainty for a sharp slump in optimism about business output in the year ahead.
The deterioration in output-related confidence sent the sentiment gauge to its lowest level since October 2022 and the second-lowest since the pandemic.
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(DCNF)—The U.S. economy hemorrhaged manufacturing jobs in August despite the Biden administration’s attempt to boost the industry with hundreds of billions of dollars in subsidies.
The number of people employed in manufacturing in the U.S. fell by 24,000 in August, with the industry down 14,000 jobs year-over-year, according to data from the Bureau of Labor Statistics (BLS). Altogether, manufacturing employment has grown just 0.3% since the Inflation Reduction Act (IRA) and the Chips and Science Act were signed into law by President Joe Biden in August 2022, despite the bills earmarking more than $400 billion in subsidies for the industry.
The August decline is in addition to a recent BLS jobs revision that showed the federal government had overestimated manufacturing employment by 115,000 between April 2023 and March 2024.
“Despite hundreds of billions in Inflation Reduction Act subsidies going to manufacturing and the mind-boggling U.S. deficit, we’ve only seen a less-than-1% increase in total employment,” Aaron Hedlund, director of research at the America First Policy Institute, told the Daily Caller News Foundation. “There is no manufacturing boom.”
The U.S. national debt currently sits at around $35.34 trillion as of Aug. 4, up from $27.75 trillion when Biden took office in January 2021, according to the U.S. Treasury Department. The increase of more than $7.5 trillion dollars is equivalent to over $57,000 for each of the 131,434,000 households that the Census Bureau estimates were in the U.S. in 2023.
Average weekly earnings in manufacturing rose from roughly $1,361 to approximately $1,370 in August, according to BLS data. Weekly earnings remain below their levels from when Biden first took office when adjusted for inflation, with manufacturing salaries rising 17.7% between January 2021 and August 2024, while inflation in that period was roughly 20%, according to the Federal Reserve Bank of St. Louis and the BLS.
In July 2023, the White House issued a press release claiming the U.S. was in the midst of a “manufacturing boom” driven largely by federal initiatives from the Bipartisan Infrastructure Law, the CHIPS and Science Act and the IRA to boost domestic green technology and semiconductor production. $84 billion worth of the nearly $228 billion of manufacturing projects worth more than $100 million that the Biden administration subsidized via the IRA and the Chips and Science Act have been paused or delayed, according to an investigation from the Financial Times published in August.
“All of the Biden-Harris administration claims on job creation are essentially false,” Peter Earle, a senior economist at the American Institute for Economic Research, told the DCNF. “Most of the rise in employment they are taking responsibility for are actually just jobs slowing returning after being destroyed by pandemic policies — most of all, lockdowns. A sizable number of the remainder of jobs that have appeared over the past three-and-a-half years are not jobs created via economic growth and commercial expansion, but rather a product of their massive debt and deficit policies.”
The White House did not immediately respond to a request for comment from the DCNF.