Manufacturing in the United States appears to be struggling. The sector started strong in 2015, but began to slip by the middle of the year before hobbling across the finish line into 2016. U.S. manufacturing contracted in both November and December of last year.
The Institute of Supply Management (ISM) manufacturing index measures how well the manufacturing sector is doing. An index above 50% indicates growth in the sector while an index below 50% indicates shrinking.
Index numbers have been decreasing for the last six months, but manufacturing had still been growing up until two months ago. The index was 48.6% in November and 48.2% last month. November was the first contraction in 36 months, and December’s ISM index was the lowest it had been since June of 2009.
So what’s the reason for the slowing down of American manufacturing? Is it lazy robots? Did someone forget schedule maintenance? Did all of the manufacturers using legacy parts decide to pack up and go home because they couldn’t find replacement components (we have the largest inventory of replacement parts for Indramat systems, so don’t worry about about that one!)?
Something big has to happen to bring the U.S. manufacturing sector to a three-year low. It’s not as simple as a couple of manufacturers having some personal problems.
One possible contributor is China’s struggling economy. China is experiencing its weakest growth rate in almost 25 years. While that struggle is happening thousands of miles across the sea, it’s having an impact on the global economy.
Another contributing factor is the growing strength of the U.S. dollar. While most Americans would consider a growing dollar a good thing, a stronger U.S. economy doesn’t necessarily mean a growing manufacturing industry. A stronger dollar means that goods manufactured in the United States are going to be more expensive for the rest of the world.
6 months of a dropping ISM index, and two consecutive months of shrinking for the manufacturing sector is certainly discourage, but it’s by no means a swan song. IT is on the upswing, and Industry 4.0 will help revitalizing the manufacturing sector. There’s no way of telling whether or not we will see this in 2016, but it’s far too early to give up on manufacturing.