Region’s manufacturing sector is still shrinking but trending in the right direction

The Milwaukee-area manufacturing sector continued to contract in July but moved in the right direction after a slight dip in June, according to the latest Marquette-ISM Report on Manufacturing.

The report’s Milwaukee-area PMI came in at 44.9 in July, up from 43.49 in June and 43.72 in May. A reading below 50 suggests the manufacturing sector is contracting while a reading above that threshold indicates growth.

After trending down for much of 2019, the index moved into positive territory in January before the coronavirus started to become a drag, first on global supply chains in February before plummeting to 35.73 by March.

July’s report found improvement in new orders, employment, inventories, exports and imports, although each of those components in the index remained below 50. Prices remained above 50, suggesting growth, and increased slightly.

On the other hand, production, supplier deliveries and order backlogs all declined.

The business outlook for the next six months improved slightly, with the diffusion index, which balances positive and negative bias, increasing from 62.5% to 63.64%.

The improvement was driven by a shift toward current conditions continuing. The percentage expecting things to get worse dropped from 25% to 18.2% while those expecting improved conditions dropped from 50% to 45.5%.

More than 36% of respondents expect conditions to remain the same in six months compared to 25% feeling that way in June.

Respondent comments primarily focused on the supply chain challenges created by COVID-19 and the related economic downturn.

One respondent noted the supply chain had been damaged by shutdowns while another said scheduled shutdowns have been extended.

“Indications that third quarter will be worse than second quarter and then some recovery to begin in the fourth quarter,” another respondent said.

Respondents also highlighted decreased airfreight capacity, growing backorders and problems with overseas suppliers leading to efforts to source more domestically.

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Arthur Thomas
Arthur covers manufacturing for BizTimes. He previously was managing editor at The Waukesha Freeman. He is a graduate of Carroll University and did graduate coursework at Marquette. A native of southeastern Wisconsin, he is also a nationally certified gymnastics judge and enjoys golf on the weekends.

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