Manufacturing sector nears contraction
REAL ECONOMY BLOG | December 01, 2022
Authored by RSM US LLP
The manufacturing sector grew for the 30th month in a row but barely hovered above contraction in November, according to data released by the Institute for Supply Management on Thursday.
The ISM’s overall index slowed to 49%, barely above the contraction threshold at 48.7%. It was the third straight decline as demand for manufactured goods stalled.
The slowdown was broad-based as production, inventories, new orders, prices paid and employment all slowed down on the month.
Except for the prices-paid component, which suggests that more relief from goods inflation is coming, the overall decline of the sector signals that a goods and manufacturing recession is imminent.
Manufacturing employment fell for the second time in three months, suggesting a softer manufacturing number when the highly anticipated jobs report is released on Friday.
That slowdown, however, is expected as the Fed continues to raise rates to combat inflation. Together with housing, the manufacturing sector is often one of the most rate-sensitive sectors.
We should expect the sector to contract even more as most of the impact from rate hikes has not yet been felt. While our forecast points to a potential recession in the second half of next year, a manufacturing recession might happen earlier.
With so much uncertainty in the economy, we believe businesses should proceed with caution in their investment and hiring decisions. There are reasons to believe that the next recession will be brief and shallow. Any overcorrection in business plans might not be desirable in case the market turns positive quickly.
Call us at +1 213.873.1700, email us at email@example.com or fill out the form below and we'll contact you to discuss your specific situation.
This article was written by Tuan Nguyen and originally appeared on 2022-12-01.
2022 RSM US LLP. All rights reserved.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Vasquez & Company LLP is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.
For more information on how Vasquez & Company LLP can assist you, please call +1 213.873.1700.
Subscribe to receive important updates from our Insights and Resources.