Rising interest rates hurt the manufacturing sector. | So Good News
The S&P Global Manufacturing Purchasing Managers’ Index is close to being released in September. Meanwhile, the Institute for Supply Management’s manufacturing index, a similar measure, was weaker than expected, with new orders and hiring plans falling.
Construction spending fell for the third straight month in August and the most in a year and a half, the Census Bureau said Monday. But manufacturing is feeling the brunt of rising rates, thanks to rising mortgage rates courtesy of the Federal Reserve.
new houses cars, electrical appliances Even the waiters and waitresses. Manufacturing output has plummeted in the wake of the pandemic as demand for small elevators used in factories and office buildings has surged.
Jim Piper’s Chicago-based company, Matot, makes them, and says business has been good this year.
But “we’re like a lot of other small businesses,” says Piper. “We’re budgeting a little more conservatively for 2023 than we usually do, with the general feelings of uncertainty in the economy saving a little money.”
As soon as the Fed started raising interest rates, construction activity slowed. Now, manufacturing is too high, says Mark Zandi at Moody’s Analytics.
“Until now, there has been a lot of wind in the production bases. Now all these winds are going to be headwinds soon,” Zandi said. “Manufacturing is a running water at this point, losing steam and will soon decline.”
Michael Pearce of Capital Economics said rising interest rates have made U.S. exports more expensive.
“We’ve seen the dollar rise 10% to 15% in the last 18 months compared to this time a year ago. That’s a real cushion for the U.S. against international competitors.”
All of this makes manufacturers and builders more pessimistic about their future sales, said Holly Wade of the National Federation of Independent Business.
“They’re pushing this decline to widen the capital discount again because of their expectation of a significant slowdown in the economy,” she said.
A bright spot: reduced supply chain delays and disruptions; This should reduce inflation going forward.
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