Insights

Several recent surveys have indicated that manufacturing activity in the U.S. has begun to slow. For the first time since 2009, the Institute for Supply Management reported that its monthly index for manufacturing fell to 49.7. An index of less than 50 indicates contraction in the industry.

Specifically, the index for new orders, a forward-looking indicator, took a significant hit. This index fell 12.3 percentage points in June to 47.8. This is the first contraction of this index since April 2009.

Drops in these indexes will cause market analysts to pay attention to the upcoming jobs report, economic information from China, Eurozone developments, and other international trade issues before settling on a firm forecast, but the news does not look good in some sectors. For example, a similar index used to track European manufacturing (Markit’s Purchasing Managers Index) has been contracting for the past 11 months in a row.

Small to medium-sized manufacturing organizations should keep an eye on the larger manufacturing landscape to see if they can gain any insight on future developments. Thought should be given on how a slowdown, or decline in larger manufacturing, could impact smaller organizations.

Manufacturers that provide the highest quality with short lead times and a competitive advantage will need to continue to focus on their core competencies to remain competitive.

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