In the absence of most government data due to the more-than-a-month-long shutdown, the country looks to private data sources on the economy. Today there were two — on manufacturing — and unfortunately, they went in opposite directions.
These are Purchasing Manager’s Indexes, or PMIs, and they track manufacturing activity — new orders and factory production levels, prices of raw materials and outgoing finished goods. Generally, they’re seen as forward-looking predictors for the sector.
The PMI from the Institute for Supply Management showed an eighth straight month of mild contraction while the S&P Global Market Intelligence PMI showed a third consecutive month of mild improvement.
Go figure, right?
Manufacturing is up. Manufacturing is down. And there’s no government data to help settle the question. Looking at it all together, Ned Hill at the Ohio Manufacturing Institute sums it up:
“You know, if you’d see me, I’d be shrugging my shoulders going ‘meh.’ Nothing’s really growing, there’s lots of uncertainty, this tariff thing keeps on shifting,” Hill said.
For industrial analyst Jonathan Sakraida at CFRA Research, when two reports that survey corporate purchasing managers came up with opposite conclusions, he went and found other economic sources.
Regional Fed banks have been reporting modest improvement in manufacturing. Plus, in corporate earnings reports, “In the third quarter, some modest growth there in orders for a lot of industrial manufacturers — Caterpillar, Deere and Co.,” Sakraida said.
All that argues the more positive report from S&P Global hits closer to the mark.
That said, S&P Global’s own economist, Chris Williamson, said his survey isn’t very positive looking into the future.
“Companies have grown increasingly gloomy about the outlook,” Williamson said.
Companies ramped up production to try to get ahead of rising tariff costs on raw materials and components, according to Williamson. Now, inventory’s piling up in their warehouses.
Overall, the U.S. manufacturing sector has survived tariffs, though not unscathed.
“It’s not been unscathed, definitely a hit to manufacturers’ order books and pushed up costs. But they’ve not led to a complete destruction of the factory sector that some economists might have feared,” said Thomas Ryan at Capital Economics.
But remember, President Donald Trump has insisted tariffs on imported goods will strengthen U.S. manufacturers, giving them a competitive advantage.
“If the idea is ‘these tariffs are bringing back our manufacturing base,’ then it has not happened yet. It’s quite the opposite,” Sakraida said.
He said since Trump’s tariffs were announced last spring, spending by U.S. manufacturers to build new factories has actually declined.