Tariff concerns slow Milwaukee-area manufacturing growth

Marquette-ISM dips for second straight month, but remains positive

manufacturing activity

Last updated on July 2nd, 2019 at 09:10 am

Growth in southeastern Wisconsin’s manufacturing sector slowed in April amid weaker demand and uncertainty about the impact of tariffs and U.S. trade policies, according to the latest Marquette-ISM Report on Manufacturing.

The Milwaukee-area PMI dipped from 67.8 in March to 58.26 in April, the second straight sharp decline in the index after hitting a high of 75.24 in February.

However, the April reading is still a strong result as any number above 50 indicates growth in the sector.

“I have to admit I’m a little concerned at the precipitous drop,” said Doug Fisher, director of the Marquette University Center for Supply Chain Management. He added if the index had stayed in the 70s he would have been concerned about the ability to maintain that pace and he doesn’t take one or two months as a trend.

Respondents said they are seeing significant reductions in near-term demand and low long-run demand. The new orders component of the index fell from 64.88 in March to 45.54, putting it in contraction territory. Order backlogs also dropped 28.9 points to 44.44.

One respondent said price increases and low inventory “continue to plague our supply chain.” The price component of the index increased 6.8 points to 95 while inventories fell 10 points to 40.

Potential tariffs on steel and aluminum along additional tariffs aimed at China could increase pricing challenges for manufacturers even more. Milwaukee-based Harley-Davidson Inc., for example, is forecasting the steel and aluminum tariffs will add $15 million to $20 million in raw material costs for the rest of the year.

The report’s business outlook for the next six months showed some of the increasing concern amongst manufacturers. The outlook diffusion index – which tries to balance positive and negative bias – dropped from 70.59 percent to 50 percent.

The decline was driven by a sharp increase in the number of respondents expecting worse economic conditions, up from 11.76 percent to 30 percent. There was also a decline in the number expecting improved conditions, down from 52.94 percent to 30 percent.

“The company’s economic peak has passed,” one respondent said.

A bright spot in the April report was an increase in both the blue- and white-collar employment indices. White-collar increased from 51.1 to 62.4 and blue-collar increased from 58.4 to 62.4.

Read more economic data reports on the BizTracker page.

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Arthur covers banking and finance and the economy at BizTimes while also leading special projects as an associate editor. He also spent five years covering manufacturing at 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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