News Summary:
Manufacturing activity fell for the fourteenth consecutive month in December, according to a monthly survey of professionals. The sector has retreated from its pandemic-era peak, when cooped-up customers bought a lot of consumer goods. Forecasts show concern for 2024 according to economists, despite the recent easing of odds for interest rate hikes by the Federal Reserve that could revive business activity.
Industry Decline in 2023:
While the overall economy continued to hold up in 2023, the same cannot be said for companies in the manufacturing sector. Manufacturing activity declined for the fourteenth consecutive month in December, according to the monthly Purchasing Managers’ Index survey conducted by the Institute for Supply Management. The index measuring employment, new orders, production, inventory, and supplier deliveries rose to 47.4% in December from 46.7% in November, but it still remains below the 50% threshold that separates “growing” from “contracting” businesses.
Challenges Facing Manufacturing in 2023:
Manufacturers in the country faced a tough year compared to other parts of the economy that shrugged off the Federal Reserve’s campaign to raise interest rates to combat inflation. Factories for all sorts of things encountered a drop in orders in the post-pandemic economy. People have scaled back on stocking their living spaces with goods to survive the lockdowns and resumed doing things they couldn’t do at the peak of the COVID-19 pandemic, according to economists.
Manufacturing Sector Outlook for 2024:
According to a comment from Brian S. Wesbury, Chief Economist at First Trust, and his colleagues, they described the manufacturing sector’s performance in 2023 as “bad” in a comment published on Wednesday. “During the COVID-19 pandemic, a combination of stay-at-home orders and additional government compensation (in the form of stimulus checks and extraordinary unemployment benefits) created an artificial boost in goods-related activities,” Wesbury wrote. “Then the economy reopened, and consumers began to shift their consumption preferences back toward a more normal mix, away from goods and back to services.”
Manufacturing Sector Outlook for 2024:
According to a comment from Oren Klachkin, Chief Economist at Nationwide, trends in business and the struggling global economy do not signal a rebound for the manufacturing sector in 2024. “We expect the manufacturing sector to face difficulties in 2024 given the prevailing deteriorating local and global economic conditions,” Klachkin wrote. “Domestically, weak consumer orders, meager capital investment, cautious inventory management, and tight corporate expense control will leave industrial activity in a state of stagnation.”
Future Outlook for the Manufacturing Sector:
However, industry professionals surveyed by the Institute for Supply Management were looking forward to a better year. One professional in the computer and electronic products sector, who spoke on condition of anonymity, stated that the Federal Reserve’s decision last month not to raise the key interest rate might represent a turning point. “Expectations of the Federal Reserve not changing interest rates will encourage more companies to spend on capital investments again,” the manager said. “With budgets approved after the beginning of the calendar year, this should help boost investment and increase industrial activity again.”
Source: https://www.investopedia.com/manufacturing-slowed-in-december-capping-off-a-lousy-year-8422014
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