Perhaps nothing makes the manufacturing industry feel quite so topsy turvy as the trajectory of the latest Manufacturing PMI.
In April, the Manufacturing ISM Report On Business – produced monthly by the Institute for Supply Management – revealed that economic activity in the manufacturing segment had contracted again for the second consecutive month. This was preceded by a two-month expansion and, prior to that, a contraction period of 26 straight months.
Economically, we know there are challenges facing this industry. Anecdotally, they may feel even bigger than what’s laid out in the data. That’s because what’s driving some of this pullback in activity is perhaps the most challenging sentiment to plan against: uncertainty.
And uncertainty most certainly has a ripple effect.
In ISM’s report, while the PMI is contracting, so also are the indices tracking new orders, production and employment. We spoke with Timothy R. Fiore, CPSM, C.P.M., the chair of the ISM Manufacturing Business Survey Committee, who told us these changes “reflected the impact of year to date tariff deployment.”
More specifically, on the demand side, Fiore said that “New Export Orders contracted strongly as our international partners placed less orders with U.S. manufacturers during the month either due to counter tariffs by foreign companies or due to embargoes by citizens of international trade partners. The lack of new export orders impacted the New Order index which itself remained in contraction for the month as demand remains weak.”
But that wasn’t even the worst of it. More significantly, Fiore added, the Production Index had contracted into “danger territory.” Coming in under 45 – a decline of 4.3 points from the previous month’s Manufacturing ISM Report On Business – shows that panelist companies, said Fiore, “continue to reduce output based on weak order books due to the lack of new orders. Employment continued its decline as production rates are decreased.”
The whiplash is real and that’s because every day seems to bring more changes on the tariff front; whether they are good or bad depends on who you ask. Some business leaders believe themselves to be on the winning side of the effort, albeit long term. And perhaps that’s true for them, but the messaging may not be getting through to the boots on the ground, where sentiment seems to be quietly falling off a cliff.
An April poll conducted by the Washington Post asked 500 manufacturing workers how they felt about tariffs and they were less than optimistic: 57% said tariffs would harm their careers and 59% said tariffs would hurt the companies they work for. In fact, WaPo says only 22% of workers polled said tariffs would help their jobs.
We know sentiment is a moving target, but just how quickly it can move is illustrated in the above data – both from ISM and the surveyed manufacturing workers. So, as business leaders, you have to make sure you manage not just the bean counting but, also, the vibe.
A recent poll by the Guardian concluded that Americans were putting “life on hold” due to economic anxiety, an issue disproportionately impacting the youngest generations in the workforce.
Likewise, workers [have been] feeling “increasingly uncertain about their employers’ business prospects over the last six months,” Daniel Zhao, lead economist at Glassdoor, recently told Fortune.
“Employees might be feeling like they’re waiting for the other shoe to drop and the tariffs are a catalyst for uncertainty to turn into layoffs, but they’re not the whole story by themselves.”
Consider, also, that workers have been dealing with “near constant change” for five years.
Zhao said that leaders can ease the anxiety being experienced by workers by going to some “COVID-era leadership strategies.” These can be basic ways to identify with workers on a personal level. During turbulent times, said the report, “being vulnerable, communicative and even admitting to not having all the answers can lead to increased trust.”
The comments, I thought, were a great reminder of how much we learned during the pandemic and how well the manufacturing industry can rebuff challenges, no matter the characteristics.