Manufacturing sector deals with uncertainty, despite rebound – Marketplace
We got some upbeat economic news today about the manufacturing sector. It has been in the doldrums for months or even years, depending on which industry survey you go by.
But that picture got noticeably rosier in the new year. Two closely watched manufacturing purchasing managers indexes both turned positive in January — indicating that manufacturing was expanding, at least a bit.
The good news comes just in time for tariffs. There is all kinds of uncertainty ahead for the sector.
Manufacturing may have gotten its head above water in January, but not by much, said economist Mark Zandi at Moody’s Analytics.
“I’ll take it, we’re on the positive side but just barely. And it doesn’t indicate any breakout here,” said Zandi.
The sector’s still facing headwinds: high interest rates, a strong dollar, weak global demand. And now —tariffs. Zandi points to the damage they did during President Donald Trump’s first term.
“Manufacturing got hit pretty hard. By the end of 2019, right before the pandemic, it was in recession,” said Zandi.
He said it’s not all gloom and doom.
“Some will benefit from the tariffs because they’ll be protected from foreign competition,” said Zandi. “But others will get hurt.”
The auto industry is likely to feel pain, said Ned Hill at the Ohio Manufacturing Institute, because it’s got an integrated North American supply chain.
“The Detroit-Windsor, Ontario area — you’ll frequently have a part go back and forth on the border several times. Is it going to get a 25% tax if it travels four times? We’ve doubled the price,” said Hill.
There’s trouble in store for the Gulf Coast as well, said Al Greenwood at ICIS, which monitors the petrochemical industry.
“Because of the magnitude of our exports, the industry is vulnerable to retaliatory tariffs,” said Greenwood.
The upshot of all this is, manufacturers are dealing with a lot of uncertainty.
Kelair Products makes industrial air-dampers at a plant outside Chicago. President Jim Piper said the company just expanded into a new product line that’s assembled in Mexico from components fabricated in the Midwest.
“With the threat of tariffs on Saturday, but now rescinded Monday morning. It doesn’t help with my stress level,” said Piper.
Piper said it’s hard to plan for the future right now.
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