Failed Bidenomics? U.S. manufacturing slump intensifies
The U.S. manufacturing sector is contracting much faster than expected, casting a dark shadow over President Biden’s plans to revitalize domestic factories.
The Institute for Supply Management's manufacturing Purchasing Managers Index (PMI)—a leading gauge of factory production across the country—fell to 46.7 in October from 49 in September. Economists were expecting no change from the previous month.
On the PMI scale, anything below 50 generally indicates that the sector is contracting. ISM’s manufacturing PMI has been in negative growth territory for 12 consecutive months.
Of the six major manufacturing industries, only food, beverage, and tobacco products registered growth. Everything else—from machinery to fabricated metals and manufacturing equipment—saw declines.
News from the factory floor contradict the White House’s reported “manufacturing boom” that’s supposedly bringing jobs back to American shores.
The jury is still out on Bidenomics
The U.S. manufacturing sector contributes roughly 11% to GDP and employs 8.4% of the workforce, according to the National Association of Manufacturers.
For decades, domestic manufacturers have been undercut by cheaper foreign production, shifting supply chains, and lax environmental enforcement in other parts of the world.
Bidenomics is trying to rewrite the industry’s fate.
The government has earmarked $200 billion for new manufacturing projects intended to revitalize infrastructure, promote clean energy, and hire an estimated 100,000 workers.
The White House claims that the U.S. economy has added more than 750,000 new manufacturing jobs since Biden took office. While the numbers check out, the growth masks a post-pandemic rebound that was partly driven by the economy’s reopening.
“After the Covid-19 pandemic began, manufacturing output fell at a 43-percent annual rate and hours worked fell at a 38-percent rate in the second quarter of 2020,” the Bureau of Labor Statistics said in October 2022.
“These were the largest declines since World War II.”
As of June 2022, manufacturing jobs have barely reached pre-pandemic levels. So, the Bidenomics spending surge hasn’t been the tide that lifts all ships. At least not yet.
Manufacturing slowdown spreads
It’s not just U.S. manufacturing that’s slumping. China’s manufacturing sector also contracted last month, with the Caixin PMI (China's PMI) sliding to 49.5 from 50.6 in September.
“Business optimism continued to decline, with the corresponding gauge hitting the lowest since September last year despite remaining in expansionary territory,” Wang Zhe, a senior economist at Caixin Insight Group, said of Chinese manufacturing.
The culprit: weakening global trade.
"The slowdown in industrial production has been accompanied by a marked weakening in world trade as reflected in recent trends in imports in the US and Europe," reported Fitch Ratings earlier this year.
According to Fitch Ratings, manufacturing’s slump is a global phenomenon extending to other major economies, including the eurozone, U.K., Germany, and South Africa.