Economic Trends for Manufacturers

For those hoping that by now we’d know if we were going to see a soft landing, a hard landing, or a V-shaped recovery – you’ll have to wait a little longer. Or perhaps a lot longer. The economy continues to send mixed signals as to the trajectory of future business and consumer conditions, as it has for two years now. (A recent New York Times article, “New Normal or No Normal? How Economists Got It Wrong for 3 Years,” takes a closer look at why forecasts have been so wrong since 2020.) 

Let’s start with manufacturing: The Manufacturing PMI, after moving ever so close to expansion territory in September, fell from 49% to 46.7% in October, suggesting that the sector continues to contract. Yet durable goods orders were up 4.7% in September (the latest available data), and orders for core capital goods (reflecting capital spending in the nation) increased 0.6% to a new all-time high of $74.46 billion. And an often overlooked benchmark largely driven by manufacturing, labor productivity, grew 4.7% in Q3, the highest rate since Q3 of 2020. 

At the same time, GDP increased 4.9% in Q3 of 2023, after a jump of 2.1% in Q2 and 2.0% in Q1. While the Q3 number is considered unsustainable, it is a far cry from predictions of a soft landing, much less a hard one. (The consensus from economists now is that 2024 will see slower growth and the potential for recession. But then, that was the consensus in October 2022 as well.) While the latest jobs report shows employment in manufacturing falling 35k — largely due to strike activity in the automotive industry — as a cooling labor market, the overall nonfarm economic added 150k jobs, which is the 34th consecutive month of job growth. With U.S. unemployment rising to 3.9%, analysts suggest this weakens the impetus for a Federal Reserve rate hike in December.

Return to Economic Indicators