Manufacturing, the sector that was supposed to benefit the most from more restrictive trade policies, has struggled to turn itself around in the past six months, according to new data from the Institute for Supply Management.
The ISM manufacturing purchasing managers’ index came in at 48.7 for August, the sixth consecutive month that it registered below 50, which is considered contraction.
While some could point to rising production as many manufacturers have moved some of their production back to the United States, sentiment and spending on new manufacturing sites have lagged.
Because of how the interconnectedness of most manufacturing supply chains, cutting off one or two international suppliers is enough to hurt domestic manufacturers.
Without clarity on how trade policies will be implemented, many manufacturers have stopped spending on new construction.
The measure for manufacturing construction spending continued to drop in July for the sixth straight month.
After three years from 2022 to 2024 of significant increases in construction spending as a result of the Chips and Science Act, it has been downhill for new construction spending. From its peak, construction spending on manufacturing sites has dropped more than 7%.
We think the sector will remain in a difficult position in the second half of the year as uncertainties linger.
Barring any new shock to the system, it won’t be until at least the second quarter of next year that we will have greater clarity on the outlook.
Read more of RSM’s insights on the global economy and supply chains.
