Manufacturers Echo Our Present Assessment, And Share Our Fundamental Concern

Yesterday's release of the Institute for Supply Management's (ISM) June Manufacturing Index pretty much echoes our present assessment of general conditions overall; expanding, but at a slowing pace.

Here's from the report:

"Manufacturing expanded in June, as the PMI® registered 51.7 percent, a decrease of 0.4 percentage point from the May reading of 52.1 percent. This is the lowest reading since October 2016, when the index registered 51.7 percent. “This indicates growth in manufacturing for the 34th consecutive month. The PMI® continued a period of expansion softening that began in September 2018. Softening this month was primarily due to demand and inputs — new orders, supplier deliveries and inventories. Four of the six big industries expanded (up from three the previous month), but at lower rates,” says Fiore. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting."

The featured respondents' commentary speaks to the fundamental cause of the slowing -- something, frankly, that we've been sternly warning of for the past three+ years; i.e., back to when we first heard Trump the candidate talking up tariffs:  emphasis mine...

WHAT RESPONDENTS ARE SAYING...

“China tariffs and pending Mexico tariffs are wreaking havoc with supply chains and costs. The situation is crazy, driving a huge amount of work [and] costs, as well as potential supply disruptions.” (Computer & Electronic Products)

“Tariffs are causing an increase in cost of goods, meaning U.S. consumers are paying more for products.” (Chemical Products)

“Demand for the remainder of 2019 has softened significantly, due to issues in the aerospace industry. The 2020 outlook is looking stronger. Overall, state and local economies remain strong. Recruiting for open positions still requires time to find the right candidates.” (Transportation Equipment)

“Global demand remains very strong. [We] shifted shipments to China from our U.S. plants to our Canadian and European plants because of tariffs.” (Food, Beverage & Tobacco Products)

“Tariffs continue to be a challenge. We are concerned about the implementation of Mexican tariffs and the cost pressures it will have on our Latin American business.” (Petroleum & Coal Products)

“Tariffs continue to adversely impact decisions and forecasting. Our increasing fear is that current trends will weaken the global economy, influencing our ability to grow in 2020 and beyond.” (Fabricated Metal Products)

“A late planting season has caused a slowdown in our agricultural business. Seeing higher prices due to tariffs and tariff-related supply chain issues.” (Machinery)
“Business is still strong. Pricing on raw materials has stabilized.” (Plastics & Rubber Products)

“Business has slowed in the last 30 to 60 days. The last 30 days have tracked 4 percent below plan, but still 6 to 8 percent above the previous year to date.” (Miscellaneous Manufacturing)

“Weather in various markets across the country has improved month over month, which has positively affected our daily output. If the trend continues, we will have to replenish [at] an increased month-over-month rate.” (Wood Products)