Milwaukee-area manufacturing contracts again in July

Sector contracts for second time in three months

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The Milwaukee-area manufacturing sector contracted for the second time in three months in July, according to the latest Marquette-ISM Report on Manufacturing.

The Milwaukee-area PMI dropped from 56.11 in June to 46.44 in July. Any reading below 50 indicates the Milwaukee manufacturing sector is contracting. The index has declined in seven of the last 12 months.

The 9.67-point drop is the largest decline in any month since December 2014. It pulled the index’s six-month average down by more than 2 points to 51.76. A 2-point drop next month would pull the six-month average into negative territory.

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New orders fell sharply during July from 51.2 to 35.8 and the pricing index dropped from 69.2 to 46.2. Production, inventories, order backlog and exports all remained in negative territory and declined.

Graph of the Milwaukee-area PMI from July 2017 to July 2019

One survey respondent noted that slowdowns in the Chinese and European economies are impacting production, although another said support services like painting, anodizing and plating are constrained, increasing lead times.

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“Customer behaviors are not providing a clear direction on market demand, creating a degree of uncertainty,” a third respondent said.

The mixed signals showed up in the six-month business outlook for Milwaukee-area manufacturing. The diffusion index, which attempts to balance positive and negative bias, dropped from 61.5% to 50%.

The change was driven by an increase from 15.4% to 21.4% in the number of respondents expecting things to get worse. The number expecting conditions to stay the same increased from 46.2% to 57.15% while those expecting improved conditions dropped from 38.5% to 21.4%

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