- Prior was -17.2
Details:
- Output (production) +7.9 vs -11.2 prior
- New orders -5.2 vs -15.8 prior
- Employment +13.6 vs +4.3 prior
- Outlook -17.5 vs -18.4 prior
- Prices paid for raw materials +25.0 vs +17.4 prior
- Prices received +1.8 vs +1.8 prior
- Wages +34.8 vs +34.9 prior
The details of this report are much better than the headline as new orders and employment materially improve.
Comments in the report:
Chemical manufacturing
- China’s economic woes are believed to be much worse than reported, driving down exports, while internal pressures on building and construction, automotive and general merchandise through inflationary pressures and particularly the cost of financing is slowing growth domestically. As a basic materials company, this is hitting us on all fronts and slowing business dramatically.
Computer and electronic product manufacturing
- We are still seeing wage pressure for our blue-collar employees, so we did another mid-year raise in order to keep our experienced team. We finally feel like the rate of wage increases will slow down. New orders have slowed slightly but a lot less than one would think from watching the news. Our products are nondiscretionary expense items, so we aren’t nearly as subject to slowdowns as capital equipment providers or discretionary spend items. We are buying some new production equipment, and we are seeing much shorter lead times and flexibility on price from suppliers.
- We had a very slow summer. Things seem to be picking up a little, but the slow summer will cause the total recurring revenue numbers to be lower, and we are constantly below our system sales numbers.
- As a member of the industrial production segment, we have had a very hard time hiring qualified personnel. For the last three years, we as a country are trying to reshore our manufacturing back to the U.S. and become more independent of China and Taiwan. The federal government is doing very little to incentivize bringing manufacturing back to our country. Our capital equipment customers are telling us that they are looking for specific manufacturing capabilities, and they are not finding them here at home. They have all moved to China in the last 30 years. I don’t have to say that raising interest rates to this level does affect the capital equipment purchases in a big way, obviously. Most of them are sold in leases, and over the last 35 years in this industry, our company has experienced the same every time interest rates go up beyond 5 percent. Hiring in the industrial production environment is a lot more difficult and costly than in the consumer industry. We are living under completely different economic circumstances to have high interest rates. Isn’t it time to start lowering interest rates and have the country’s backbone manufacturing industry become more confident in the economy?
- Due to the cost of borrowing and lower order levels for the fourth quarter, the company had to “optimize” staff and is looking to focus on the bottom line.
- We have one vendor who uses aluminum, and their lead time has increased to over five months. It is causing us all kinds of difficulties.
- China remains very weak, with no uptick post-COVID. All markets have weakened except auto, which has built inventory over the last several quarters. We expect that market to roll over, too; perhaps the UAW [United Auto Workers] strike will be the impetus.
Fabricated metal product manufacturing
- Supply constraints are improving, but there are still some ongoing challenges.
- Uncertainty related to economy, fiscal policy and the ability to renew our line of credit on favorable terms in early 2024 [are issues affecting our business].
- We are having a record level of sales, production and revenue for the last six months.
Food manufacturing
- As we prepare for continued uncertainty in the economy, we are holding off on replacing team members who leave for retirement or other reasons. We are also introducing the lean principles and mindset to our organization to reduce waste in every area of our business.
- Beef prices and availability are posing challenges to our business right now. Chicken is also increasing in cost.
- A significant cut in U.S. government purchasing looms, yet domestic orders have increased. The latter is a blip due to a specialized funding program.
Food and beverage stores
- The consumer is changing purchasing habits and looking for value in their food purchases. This trend will continue.
Machinery manufacturing
- The summer funk has not relented. We see glimmers of potential, but purchase orders are not being released, quantities are being scaled back, and general sentiment is rather blase.
- The demand for our products remains soft, and we see no signs of improved business activity for at least another year.
Paper manufacturing
- Overall activity is now trending down 2–3 percent. Our industry is down 6–10 percent.
Primary metal manufacturing
- We continue to see weakening demand in the primary metals sectors. This is in part due to uncertainty on many fronts, but especially with federal regulations and taxes. We are closely monitoring trends across all sectors of the economy but continue to receive feedback from the majority of customers that the economy is slowing down considerably.
Printing and related support activities
- We have been very fortunate to have had some large jobs that have kept us very busy this summer, when many in our industry have been slow. September will be as good if not better than August, but then it seems our world will get slower and see greater uncertainty. Labor costs are continuing to go up, but it seems that prices we pay for our materials are possibly staying constant.
Transportation equipment manufacturing
- The outlook is dismal with oil prices increasing and interest rates strangling many sectors, including ours.
- 2024 is looking better for the commercial vehicle industry in spite of increased interest rates. However, we are still forecasting a 13 percent drop in customer demand.