Aug 31, 2020 - Economy & Business

Manufacturing in the Midwest is improving, but still weak

Data: Institute for Supply Management; Chart: Axios Visuals
Data: Institute for Supply Management; Chart: Axios Visuals

Manufacturing in the Midwest, a telltale sign for the overall health of the industry, is recovering but not as fast as hoped and employment continues to lag, new data show.

What's happening: The August reading of the Chicago Business Barometer, or Chicago PMI, fell seven-tenths on the month to 51.2, but was the second consecutive reading above 50 after having been below that number for about a year.

  • Fifty is the barrier that separates expansion and contraction.

By the numbers: Production improved further in August, rising 1.4 points to the highest level since June 2019. Companies noted that previously pushed out orders led to an increase in production, with demand up as well, and new orders edging up to a one-year high.

  • Employment rose 0.9 points but remains in contraction for a 14th straight month, and firms again noted staff reductions due to the coronavirus pandemic.

What they're saying: "Anecdotal evidence suggests that the industrial and agricultural sector were hit the hardest and recovered only slowly, while the medical sector is faring very well," the report from the Institute for Supply Management noted.

Watch this space: A majority of respondents (55.6%) said they do not expect to return to full operating capacity until 2021 or later, while 26.7% are back at normal capacity already.

  • Only 8.9% of respondents forecast utilizing their full capacity in Q3 2020 and Q4 2020, respectively, the report found.
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