Manufacturing is doing all right, for now
The Purchasing Managers Index is out today, it’s a measure of activity in the manufacturing sector and it’s at a healthy 56 — the highest measure of manufacturing activity since 2018. Anything above 50 means growth, and orders are surging.
Business is good for Michael Araten, CEO of Sterling Drive Ventures. “We’re going gangbusters,” Araten said. “We’re virtually at capacity of production. We’re hired people; we’re looking to hire more people.”
They make plastic parts — swabs for coronavirus test kits, window parts, also toys. It’s all going very well. Overall factory shipments in the economy are only down 3.5% from February. Manufacturing feels like it’s coming back, but at the same time it is also suffering.
“This is really truly the weirdest time I’ve ever seen,” said Harlan Stone, CEO of HMTX industries.
HMTX makes luxury vinyl flooring it manufactures outside the U.S. but sells into the U.S. market. While it has had record sales and record revenue, where that money comes from looks a little different this year.
“Whereas our home improvement business is great, we also supply to hotels and restaurants — a separate segment of the economy,” Stone said. “And that is badly depressed, so it’s really a tale of two cities.”
On the whole it seems there’s more positive than negative in manufacturing for now.
“What’s going on right now we think is that businesses are refilling their inventories. They’re restocking after this period in which they couldn’t buy stuff,” said Sam Coffin, an economist with UBS. “After that period of restocking, there could be a bit of pause.”
It could be a long pause, and the same goes for the economy as a whole.
“It’s going to take much longer than just a few months, it’s going to take years,” said Ernie Tedeschi, an economist at Evercore ISI. “This recovery is looking more and more like it will be like the recovery from the Great Recession.”
Tedeschi said after the 2008 recession, the country didn’t reach full employment for probably around a decade, if at all.
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