Data Points to Continued Disruption But Not an Impending Recession
Looking at data compiled by government agencies can help organizations gain insights into the current state of manufacturing. And that data doesn’t point to an impending recession, said Jason Miller, Ph.D., associate professor of supply chain management (SCM) and incoming interim chair of the Department of SCM at Michigan State University’s Eli Broad College of Business.
He spoke during “Supply Chain Economics: Current Conditions in the Industrial Sector,” a recent webinar presented by CAPS Research, the Tempe, Arizona-based program in strategic partnership with Institute for Supply Management® (ISM®) and Arizona State University.
For example, based on historical data — in particular, looking at the drop in imports in during the 2009 economic crisis and another during the height of the trade war in recent years — “if we were really going into a recession, we would expect to see containerized imports falling off, and we’re not seeing that,” Miller said.
According to the U.S. Census Bureau data, he said, containerized imports to the U.S. have increased 30 percent compared to 2019, he said. Retail sales — excluding automobile sales and parts dealers — are above the pre-coronavirus pandemic trend line, Miller said. Unprecedented sales are contributing to record numbers of imports, he said. “People essentially went crazy buying stuff” due to the March 2021 stimulus, he said, and while sales have slowed somewhat, they are still much higher than consumer sentiment would indicate.
Among other considerations:
Manufacturing revenue has reached its highest level since 2004, and inflationary forces have been a factor. According to Census Bureau data for first quarter 2022, 14 of the 15 largest manufacturing sectors are recording higher profitability than they did during the same period 2019, Miller said. The amount of profitability varies by sector.
Manufacturing employment has rebounded. Manufacturing employment (those working at locations classified as primarily engaged in manufacturing activities) has more or less returned to pre-COVID-19 levels, according to Census Bureau data, Miller said.
There still are plenty of manufacturing job openings. “We are still at unprecedented high levels of (manufacturing) job openings compared to where we were in 2018,” Miller said, citing U.S. Bureau of Labor Statistics (BLS) data. “I think this series is indicative of the strength of manufacturing in terms of labor market tightness.” If job openings were to slow, he said, it will indicate a “substantial cooling,” for labor as well as demand in the manufacturing sector, he said.
Manufacturers continue to face huge inflationary pressures. Miller analyzed select BLS statistics from the producer price index, including the June producer price index for final demand — finished goods. He anticipates a best-case scenario of six to nine months of continued inflationary pressure.
Materials shortages for most sectors aren’t likely to go away soon. Census Bureau data pertaining to operating at less than full capacity due to insufficient supply of materials points to about another year before levels begin to return more to normal, Miller said. However, continued COVID-19 disruption, such as lockdowns in China, could change the outlook, he said.
(Image credit: Getty Images/Javier Ghersi)