Manufacturing Sector: Downturn Amid Construction Highs?

The U.S. manufacturing sector faces contraction with a PMI of 48.7 in May 2024, while manufacturing construction hits a record high. What's up with these mixed signals?

Manufacturing Sector: Downturn Amid Construction Highs?
Image Source: ISM

The U.S. manufacturing sector faced a contraction in May 2024, with the ISM Manufacturing PMI dropping to 48.7%, down from 49.2% in April. This indicates a faster contraction rate, driven by a sharp decline in new orders and production.

High borrowing costs, restrained business investment, and softer consumer spending are contributing factors.

US Manufacturing Construction

Manufacturing construction spending continues to rise, driven by significant investments in the electronics and electrical sectors, thanks to recent federal incentives.

Meanwhile, manufacturing construction spending reached new highs, powered by significant investments in electronics and electrical sectors, thanks to the CHIPS Act and Inflation Reduction Act.

However, experts like Jason Miller suggest that these data might overstate actual plant construction due to declining production of construction supplies​.

"I continue to believe these data, even the inflation adjusted version used by the BEA, are overstating the true magnitude of plant construction. For example, separate data for industrial production of construction supplies has been trending down since an early 2022 peak." – Jason Miller, Supply Chain Professor

Eyes on Chicago

The Chicago Manufacturing PMI hit its lowest level since May 2020, indicating severe regional contraction.

Despite this growth, the Chicago Manufacturing PMI plummeted to 35.4, its lowest since May 2020, reflecting broader economic concerns.

Sources: Joseph Politano on LinkedIn: US Manufacturing Construction Inched Up | The Kobeissi Letter on X: Chicago Manufacturing PMI Drops | James E. Thorne on X: US Manufacturing Sector Contraction

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