According to the Institute of Supply Management (ISM), factory activity has declined since July’s index of 51.2 – falling to 49.1 in August. This is the lowest figure since January 2016 and marks the fifth consecutive month of decline in manufacturing.
However, it differs depending on the sector. The ISM identified 16 manufacturing sectors in its report, analyzing how each sector has performed since the start of the trade war.
Seven of the 16 sectors experienced contractions because of tariffs, reports ISM. These are clothing, leather and related products; Fabricated metal products; transportation equipment; primary metals; Plastic and rubber products; paper products; and electrical equipment.
The other nine sectors experienced growth. These are textile factories; Furniture and related products; Food, beverages and tobacco products; wood products; petroleum and coal products; non-metallic mineral products; Machinery; miscellaneous manufacturing; and chemicals.
“Companies that process wood products and manufacture furniture, in particular, have been buoyed by single-family housing starts spurred by low mortgage rates, low unemployment and strong consumer spending,” Zacks writes. Equity Research in its analysis of the report. “In fact, repair and renovation activities will further increase demand.”
Furniture saw job growth, falling commodity prices, growth in new export orders, and growth in imports.
Wood products, along with 10 other sectors, however, saw a decline in new orders. The sector also experienced a drop in employment, a slowdown in deliveries from suppliers, a drop in imports, but also a drop in the price of raw materials and an increase in inventories.
The trade war is having an effect, writes the ISM.
“Respondents expressed slightly more concern about trade turbulence between the United States and China, but trade remains the most important issue, indicated by the sharp contraction in new export orders,” said ISM President Timothy Fiore. “Respondents continued to note supply chain adjustments following the shift of manufacturing from China. Overall sentiment declined this month and hit a 2019 low. “