Is Wisconsin Manufacturing Recovering?

Wisconsin manufacturing is recovering from the impact of the COVID-19 pandemic, which has strained shipping schedules but also given a boost to domestic suppliers in the face of uncertainty about international sources.

The Marquette ISM Manufacturing Survey for September paints a guardedly upbeat picture for the sector in southeastern Wisconsin and northern Illinois, the focus of the report, which is put out monthly by the university.

At the same time, there’s still the prospect that the pandemic could again derail the economy, says the report’s author, Manoj Babu, director of the Center for Supply Chain Management at Marquette.

Across the rest of the state, “The broader manufacturing market should follow the national trend line as shown on the report,” Babu says. With manufacturing recovering from interruptions in the shipping of supplies caused by the pandemic, consumer confidence is rising.

“The trend is sustainable,” Babu says — but whether it lasts will depend on the course of the pandemic. “The real test will be the agility and adaptability of the business sector to be able to recover from another major disruption.”

As other reports have noted, manufacturing has been less severely hit in the COVID-19-triggered recession than other segments of the economy, notably services, hospitality and entertainment.

The centerpiece of Marquette’s manufacturing survey — like the Purchasing Managers Index from the national Institute for Supply Management (ISM) on which it is modeled — is a survey of senior business executives in the region. The survey found some industries were benefiting from pent-up demand, including mining and automotive segments. The food industry is growing, and with more COVID-19 cases it could grow further, the report found.

On the down side, the report found slower growth in the energy sector, while both production and demand for steel continue to decline.

A variety of factors are interrupting or delaying shipping and supplies, which has led to back orders, slower fulfillment and longer transportation lead times. Companies also are responding by drawing down inventories.

Survey participants reported increasing their domestic sourcing of materials because of the disruption of international supply chains.

That doesn’t appear to have boosted jobs, however. The report’s employment index is declining; participating firms indicated they were not yet replacing workers who were laid off when the pandemic started.

The executives surveyed appear to be more hopeful about seeing better conditions over the next six months, the report found, an outlook that has been mirrored in the ISM’s national survey.

But current indicators that things are improving could reverse, Babu warns, “if we encounter another resurgence of infections in the winter months.”

That prospect is already on the minds of state health officials, however. This week, Gov. Tony Evers and state health officials warned that the latest surge of COVID-19 cases is on track to get worse before it gets better.

Reprinted with permission of Wisconsin Examiner.