The southeastern Wisconsin manufacturing sector contracted for the first time since October 2016, according to the latest Milwaukee-area PMI in the Marquette-ISM Report on Manufacturing.
The region’s PMI in May was 47.83. A reading above 50 indicates growth in the manufacturing sector while a reading below 50 indicates a contraction. October 2016 was the last and only time the PMI was below 50 since the start of 2016.
In May of last year, the index was at 67.9, its second highest reading since the start of 2016. The highest reading during that period was 75.2 in February 2018. Those peaks came just as the Trump Administration was beginning processes that would lead to increased tariffs on steel and aluminum along with goods from China.
The Milwaukee-area PMI has trended down since the first half of 2018 and manufacturers deal with supply chain uncertainty, higher prices and retaliatory tariffs when exporting their products.
The index has been down seven of the last 12 months and the six-month average has declined every month starting in June 2018.
Wisconsin is not the only area dealing with a manufacturing slowdown. The national Institute of Supply Management PMI has declined six of the last 12 months through April. The report’s six-month average has been down for five straight months. Data for May will be released next week.
Despite the decline in the headline number, the monthly Marquette-ISM report did show some optimism. The six-month business outlook diffusion index, which balances positive and negative bias, increased from 50% to 65.4%.
The shift was primarily driven by an increase from 16.7% to 46.2% in the number of people expecting improved conditions moving forward.
The hiring outlook for white-collar workers in manufacturing also showed a strong improvement from 48.9 in April to 57 in May. The blue-collar outlook dipped 0.1 to 52.9.
In their comments, respondents pointed to additional tariffs on Chinese goods leading to increased costs and “ambiguous market movement and demand drivers.”
“Long term forecasts suggest market increases that are not supported by economic indicators and other key trends,” one commentator said.
