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Manufacturing, Despite Challenges, Continues to Cruise Economically

Bill Koenig
By Bill Koenig Senior Editor, SME Media

The manufacturing economy, despite numerous challenges, is still cruising.

Machine tool orders ended 2021 strong and that trend continued in early 2022. AMT–The Association for Manufacturing Technology sees that strength lasting into the rest of the year.

Economic expansion in manufacturing cooled a bit in recent months but remained at high levels, according to the Institute for Supply Management’s index, known as the PMI.

An index reading of 50 percent indicates a growing manufacturing economy. The PMI consistently has been well above that benchmark.

During this period, there has been a continuing shortage of semiconductors. That has affected various industries, including automotive.

The result has been curtailed production and temporary plant shutdowns.

In February, analysts for IHS Markit, AlixPartners and Wells Fargo spoke at a webinar sponsored by the Automotive Press Association in Detroit. They forecast that the shortage may ease this year but it is not ending.

“These shortages are going to continue,” Dan Hearsch, managing director in the automotive and industrial practice of consulting firm AlixPartners, said during the presentation.

Automakers “have to order chips much longer in advance,” he said. “Every order is starting from scratch.”

“Production cuts are still coming but the magnitude of the cuts is less,” said Colin Langan, lead automotive analyst for Wells Fargo. “We’re crawling out of the situation.”

And COVID-19 remains a concern. Since early 2020, factories implemented new safety procedures and restarted production that had been stilled by the pandemic. New variants come along. It’s an ongoing situation that has become part of business planning.

In early 2022, Russia invaded Ukraine. That caused a spike in crude oil prices. At the pump, gasoline prices went above $4 a gallon in the United States. It’s uncertain what other economic impacts may occur because of the war.

Despite all that, manufacturing has carried on.

Manufacturing is experiencing “a continuing demand-driven expansion,” Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee, said in early February.

The sector, he added, has rebounded “from the obstacles presented by Omicron,” a recent variant of COVID-19.

With the Ukraine invasion, Western nations imposed various economic sanctions against Russia.

“I don’t see it dragging down manufacturing expansion,” Fiore said of the war. “This thing is going to take its course.”

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