{"id":12553,"date":"2023-07-12T19:36:13","date_gmt":"2023-07-12T19:36:13","guid":{"rendered":"https:\/\/zacksim.com\/blog\/?p=12553"},"modified":"2023-07-12T19:37:16","modified_gmt":"2023-07-12T19:37:16","slug":"what-manufacturing-slump-means-for-the-u-s-economy","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/what-manufacturing-slump-means-for-the-u-s-economy\/","title":{"rendered":"What Manufacturing Slump Means for the U.S. Economy"},"content":{"rendered":"\n<p><em>Benny A. from Youngstown, OH asks: <\/em>Hello Mitch, I saw in the news that the U.S. manufacturing sector has been experiencing some major struggles lately. Is this a cause for concern?<\/p>\n\n\n\n<p><strong>Mitch\u2019s Response:<\/strong><\/p>\n\n\n\n<p>Thanks for your email. You\u2019re correct to point out that factory activity in the U.S. has been in a prolonged slump. According to the Institute for Supply Management\u2019s (ISM) manufacturing gauge, factory activity in the U.S. dropped to a reading of 46, which is the weakest it\u2019s been since May 2020.<sup>1<\/sup><\/p>\n\n\n\n<p>Anything under 50 signals a contraction, and we\u2019re now in the longest period of contraction for manufacturing since 2008-2009, which readers will recognize as years during the Global Financial Crisis.<\/p>\n\n\n\n<p><strong><u><a href=\"https:\/\/go.steadyinvestor.com\/dos-and-donts-of-volatility?source=zim&amp;medium=blog&amp;term=mitchsmailbox_dos_and_donts_zim_07_13_2023&amp;content=dos_and_donts\">Explore the Do\u2019s and Don\u2019ts of Stock Market Volatility<\/a><\/u><\/strong><\/p>\n\n\n\n<p>How should investors navigate the challenges posed by the fluctuations of market volatility?<\/p>\n\n\n\n<p>It is impossible to avoid volatility, but there are ways you can minimize the worst impacts of a volatile market. In our newest guide, \u2018<em>The Do\u2019s and Don\u2019ts of Stock Market Volatility<\/em>\u2019 we provide recommendations for investors, based on 30 years of expertise. We also explore:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>3 best practices to successfully manage periods of market volatility<\/li>\n\n\n\n<li>3 most common mistakes investors make, and why they are so damaging to your long-term investing goals<\/li>\n\n\n\n<li>Historical data that supports our conclusions and underscores the recommendations we propose<\/li>\n<\/ul>\n\n\n\n<p><strong><u><br><\/u><\/strong>If you have $500,000 or more to invest, get our free guide today!<br>&nbsp;<br><strong><u><a href=\"https:\/\/go.steadyinvestor.com\/dos-and-donts-of-volatility?source=zim&amp;medium=blog&amp;term=mitchsmailbox_dos_and_donts_zim_07_13_2023&amp;content=dos_and_donts\">Download Your Copy Today:&nbsp;<em>The Do\u2019s and Don\u2019ts of Stock Market Volatility<\/em><\/a><\/u><\/strong><em><strong><a href=\"https:\/\/go.steadyinvestor.com\/dos-and-donts-of-volatility?source=zim&amp;medium=blog&amp;term=mitchsmailbox_dos_and_donts_zim_07_13_2023&amp;content=dos_and_donts\"><u><sup>2<\/sup><\/u><\/a><\/strong><\/em><\/p>\n\n\n\n<p>When you look across the subset of indicators within the manufacturing gauge, you find weakness throughout. Order backlogs are falling, employment growth has been sputtering, and the index of new orders \u2013 which is a leading indicator \u2013 fell for the 10<sup>th<\/sup> straight month (chart below).<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"350\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/07\/pic1-3-1024x350.png\" alt=\"\" class=\"wp-image-12554\" srcset=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/07\/pic1-3-1024x350.png 1024w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/07\/pic1-3-300x102.png 300w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/07\/pic1-3-768x262.png 768w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/07\/pic1-3.png 1318w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p><strong><em>Source: Federal Reserve Bank of St. Louis<sup>3<\/sup><\/em><\/strong><\/p>\n\n\n\n<p>Overall, it\u2019s not great. But there are a few bright spots worth mentioning that also help explain why economic alarm bells are not going off. The first is that an index measuring producer prices, which are the prices paid by manufacturers for inputs, has fallen substantially \u2013 a good sign that price pressures could continue abating in the future. Easing price pressures factor as a positive for inflation and interest rates, and also signal improved supply chain conditions.<\/p>\n\n\n\n<p>Another point to make is that new orders are falling from historically high levels (see chart below), so the total output is still relatively strong even as activity is weakening.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"350\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/07\/pic2-1-1024x350.png\" alt=\"\" class=\"wp-image-12555\" srcset=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/07\/pic2-1-1024x350.png 1024w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/07\/pic2-1-300x102.png 300w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/07\/pic2-1-768x262.png 768w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/07\/pic2-1.png 1318w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p><strong><em>Source: Federal Reserve Bank of St. Louis<sup>4<\/sup><\/em><\/strong><\/p>\n\n\n\n<p>A final point to make is that the manufacturing sector in the U.S., while important, only comprises about 12% of the economy in terms of output. Weak factory activity, in other words, is not likely to sink the economy by itself.<\/p>\n\n\n\n<p>The other side of the ISM ledger is services, which is the crucial driver of U.S. economic activity. There we still see positive momentum \u2013 the U.S. services sector remained in expansion mode for the sixth consecutive month, with Services PMI registering at 53.9. Among the strong contributors to services sector activity was the Business Activity Index, which rose 7.7% from May, and the New Orders Index, which increased by 2.6%. Strong services activity and spending are the reasons the U.S. economy continues to expand, which makes it important to view manufacturing weakness in a broader context.&nbsp;<\/p>\n\n\n\n<p>Factors, like the manufacturing sector, can contribute to a volatile market, and it\u2019s important for investors to learn how to navigate through uncertain times like these.<\/p>\n\n\n\n<p>Although it\u2019s impossible to avoid volatility, there are ways you can minimize the worst impacts of a volatile market. In our newest guide, \u2018<em><strong><a href=\"https:\/\/go.steadyinvestor.com\/dos-and-donts-of-volatility?source=zim&amp;medium=blog&amp;term=mitchsmailbox_dos_and_donts_zim_07_13_2023&amp;content=dos_and_donts\">The Do\u2019s and Don\u2019ts of Stock Market Volatility<\/a><\/strong><\/em>\u2019 we provide recommendations for investors, based on 30 years of expertise. We also explore:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>3 best practices to successfully manage periods of market volatility<\/li>\n\n\n\n<li>3 most common mistakes investors make, and why they are so damaging to your long-term investing goals<\/li>\n\n\n\n<li>Historical data that supports our conclusions and underscores the recommendations we propose<\/li>\n<\/ul>\n\n\n\n<p>If you have $500,000 or more to invest, get our free guide today!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>U.S. manufacturing is in the longest period of contraction since the 2008 financial crisis\u2014does it signal a recession ahead? <\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[66,71],"tags":[],"class_list":["post-12553","post","type-post","status-publish","format-standard","hentry","category-mitchs-mailbox","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12553","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=12553"}],"version-history":[{"count":3,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12553\/revisions"}],"predecessor-version":[{"id":12558,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12553\/revisions\/12558"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=12553"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=12553"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=12553"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}