Milwaukee-area manufacturing sector continues downward slide

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At this time last year, the Milwaukee-area manufacturing sector was at the tail end of a 10-month stretch of sustained strong performance. The latest Marquette-ISM Report on Manufacturing suggests the industry is now at its lowest level since the end of 2015.

The report’s Milwaukee-area PMI for October was 42.54, the lowest level since September 2015. Any reading below 50 indicates the sector is contracting. The index has been below that threshold for five of the last six months, averaging 47.6.

In contrast, last October the report had a PMI of 58.21 and a six-month average of 61.5.

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In the October 2018 report, survey respondents were beginning to express some concern about the industry, specifically pointing to tariffs, high costs, inflation and reduced supplier inventories. One respondent said it seemed “as though the economy is cooling some.”

The October 2019 report paints a much less optimistic picture. One respondent said customers continue to reduce orders into 2020 and another said that while business is steady, it is not robust and growing.

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“Business owners are refusing additional work and are not interested in expanding due to recent concerns regarding an upcoming recession,” a third respondent said.

The report’s six-month outlook also declined in October with the number of people expecting improved conditions going from 33% to 16.6%. The percentage expecting things to get worse increased from 25% to 27.8%.

A weaker outlook in the manufacturing sector appears to be translating to the workforce as well. Manufacturing employment in metro Milwaukee was down 1.1% from the prior year in September.

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The average weekly hours of production workers reached a high of 43.7 hours last September, but the region has seen year-over-year declines in each of the last six months, according to data from the U.S. Bureau of Labor Statistics.

The declining outlook matches with Marquette University Law School polling from this year that shows voters are increasingly pessimistic about the economy. In three of four polls conducted this year more respondents have said they expect the economy to get worse in the next 12 months than expect it to get better. Prior to 2019, the poll did not have a single result like that since it started in 2012.

Another measure of the state’s economy, the Chicago Fed’s Midwest Economy Index, has also moved in the wrong direction.

Wisconsin’s economic growth has lagged behind its historical average every month since April and has lagged behind its expected performance given national conditions every month since May.

The state’s manufacturing sector has been a major contributor to the lagging growth. The sector has been below historical trends in five of the last six months. It also lagged behind expectations given national conditions in the last two months.

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