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U.S.-China trade war

Manufacturing Indexes Slump as Trade Wars Continue

Jan. 7, 2020
PMI, fluid power reports show a continuing decline despite some optimism.

Two indexes in the manufacturing and fluid power markets showed sharp declines in December as the continuing trade wars have fueled greater production uncertainty.

The Institute for Supply Management’s monthly PMI Index fell to 47.2% in December, well below the PMI’s growth level of 50% and 0.9 percentage points lower than November’s level of 48.1%. It marked the fifth straight month of manufacturing decline following almost three years of growth, and manufacturing experts continued to decry the impact of tariffs in the U.S. market.

In the fluid power segment, the National Fluid Power Association’s monthly report showed a double-digit decline in business. NFPA data found shipments of fluid power products for November 2019 decreased 15.0% when compared to November 2018 and decreased 17.1% when compared to November 2019. The declines were across the board, as mobile hydraulic, industrial hydraulic, and pneumatic shipments all decreased.

The ISM report, released Jan. 3, painted a similar picture. “Global trade remains the most significant cross-industry issue, but there are signs that several industry sectors will improve as a result of the phase-one trade agreement between the U.S. and China,” said Timothy Fiore, chairman of the ISM’s Manufacturing Business Survey Committee. “Among the six big industry sectors, Food, Beverage and Tobacco Products remains the strongest, while Transportation Equipment is the weakest. Overall, sentiment this month is marginally positive regarding near-term growth.”

New orders, inventories, and order backlog all contracted again in the index. While expressing some optimism for the new year, committee members cited trade issues as a significant concern. Among the comments:

  • “Backlog of orders is shrinking due to new order pace continuing to fall.” (Computer & Electronic Products)
  • “Due to sluggish sales, we have introduced promotions to generate increased sales.” (Chemical Products)
  • “Cautiously optimistic is the rule these days. Sales are decent, but we’re wondering what 2020 will bring. Still hedging that it will be successful—but maybe not as much as this year.” (Transportation Equipment)
  • “Starting to see suppliers try to pass on costs associated with tariffs. Uncertainty on the trade front continues to keep agricultural markets on the defensive.” (Food, Beverage & Tobacco Products)
  • “Down month-to-month, but up over last year.” (Miscellaneous Manufacturing)
  • “Anticipated large export orders did not materialize. As a result, expected U.S. production has decreased.”(Fabricated Metal Products)
  • "Dealer inventories have rebounded, and overall customer market has softened, resulting in corrections to near-term production schedules and a tentative forecast outlook." (Machinery)
  • "Our outlook for the first quarter of 2020 is positive. We have secured contracts from a number of former customers and expect sales growth of about 5% over Q4 of 2019." (Textile Mills)

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