Talent Talk: Is the Manufacturing Recession Almost Over?Talent Talk: Is the Manufacturing Recession Almost Over?
Manufacturing has experienced a lengthy, consistent economic contraction, but the numbers have been trending upward since June.
October 23, 2023
Remember in Q1 and Q2 2022, when real US GDP declined by 2.0% and 0.6%, respectively? Some declared that we were officially in a recession. Others pointed out that, while two consecutive quarters of negative GDP growth has been widely accepted as the definition of a recession, it turns out an organization called the National Bureau of Economic Research (NBER) is the umpire for such things.
As baseball fans know, it isn’t a ball or a strike until the umpire decides. The NBER decided we were not in a recession in 2022. My point is, the definition of a recession is fuzzy, and even then, one must look at the entire economy. This includes personal spending, construction, imports, exports, and much more.
If you are reading this, you probably care a lot more about the state of the manufacturing economy, and, more specifically, plastics manufacturing. This sector of the US economy has been in a recession for some time. But we may be at an inflection point. The graph below from the Institute for Supply Management (ISM) illustrates that manufacturing has been contracting for 11 consecutive months.
Plastics & Rubber Products is one of the 21 industries that the ISM tracks to arrive at the overall manufacturing picture. We have typically been somewhere around the middle of the pack, or slightly below the middle.
Data from the Institute for Supply Management (ISM) shows that the manufacturing economy has been on an upward trend since June. Chart courtesy of ISM®.
A reading above 50 generally means growth, and a reading below 50 generally means contraction. If you look closely, however, you will see that the September reading was 49, and it has been on a clear upward trend since June. Based on this mini-trend and anecdotal evidence we are seeing and hearing, Talent Talk believes that we will enter an expansion phase in manufacturing soon.
Further, once this expansion begins, we believe it will be a longer-term phenomenon, fueled by investments in manufacturing infrastructure and reshoring, although buffeted by the headwinds of relatively high interest rates. As rates presumably begin to ease sometime in 2024, that would only add to the momentum.
About the author
Paul Sturgeon is CEO of KLA Industries, a national search firm specializing in plastics, packaging, and polymer technology. If you have a topic you would like to see discussed, a company that is growing, or other ideas for this blog, e-mail Sturgeon at [email protected].
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