The beginning of the month means lots of data drops. Let’s start with the manufacturing sector: Forecasters expected the news to be bad, and guess what? The news was bad. Actually, even worse than expected.
The economy might still be growing, but the manufacturing industry is not. It contracted again this month — this time with some of the worst indicators we’ve seen all year. Production is down, new orders are down, sector employment is down, export orders are down. The one thing that’s up is inventory, according to S&P Global. Although that’s bad too.
“There’s just this growing pessimism about the economic outlook globally that’s causing this lack of investment, a lack of spending,” said Chris Williamson, the chief business economist at S&P Global Market Intelligence.
He said he’s most worried about the decrease in demand and all the inventory piling up that companies will want to sell off before manufacturing again.
“Production cuts are going to deepen, because you’ve got your warehouses filling up and you’ve got a lack of orders coming in, so where’s this going to go?” he said.
All that creates the gloomiest production outlook in a year and a half, Williamson said.
The main villain here? Uncertainty. The biggest question consumers are asking right now is, “Who will be president next year?” said Joseph Sarkis, a professor of supply chain management at Worcester Polytechnic Institute.
He said many consumers are thinking they’ll hold off on the purchasing until they know who’s going to be running the country.
“In my opinion, it doesn’t matter who wins,” he said. “They just want certainty afterwards.”
Plus, there’s a possible incentive to pick up production coming later this month: “The other uncertainty, broadly and economically, that we’re facing is what is the Federal Reserve going to do with the interest rates,” Sarkis said.
But, there’s still optimism coming from manufacturers, said Ben Gudeman, vice president of sales for Mitsubishi HC Capital America.
“Some of the vendors that we work with are looking forward to kind of the end of the year, and what 2025 will bring, from what they’re hearing from their customers,” he said.
That’s also how long it’ll take for the current uncertainty to resolve. By then we’ll have a new president and, likely, an interest rate cut.
