Despite some bright spots for U.S. manufacturing in recent years, driven in large part by companies reshoring or bringing factories back to this country, the sector overall continues to soften, continuing a contraction that has been underway since Q4 2022.
As measured by overall factory activity, this slide shows no signs of slowing down. In fact, seven industries across the sector reported contracting activity in May.
This is another sign that the U.S. consumer is getting weaker and running out of disposable income to buy the products that manufacturers are producing. As a result, demand is weakening, and producers are pulling back.
Like consumer spending, we watch manufacturing activity as a barometer of market volatility, a sign of what could be coming next for the market. That’s because softening demand can mean bigger issues down the road, as lower demand drives a broader pullback across the economy.
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