Manufacturing sector shows signs of life
The manufacturing sector has been pretty sluggish in recent years, partially thanks to high interest rates and weak customer demand. But there are some signs that the manufacturing sector has been getting busier lately.
Up until last month, the manufacturing sector had been contracting for more than two years, according to the Institute for Supply Management. In the last few months, however, orders of manufactured goods have been growing.
“What appears to be happening is our conservatism on investing in capital and long-life durable goods is easing a little bit,” said ISM’s Tim Fiore.
It helps that interest rates have come down some, he said. And the equipment and other goods companies bought early in the pandemic might be getting old.
“People need to replace capital, people need to replace consumable goods,” he said.
It’s still too early to tell whether the recent uptick in manufacturing activity is a long-term trend, according to Justyna Zabinska-La Monica, a senior manager of business cycle indicators at the Conference Board.
For instance, some companies might be making one-off orders because they’re worried about new tariffs — “making sure that I’m going to get the goods before the prices go up, before tariffs go up,” she said.
Either way, Zabinska-La Monica thinks an uptick in new orders today means more spending on production and hiring in the future.
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