U.S. manufacturing continues to hope for better

For a North American division of Norsk Hydro, a major global aluminum producer, business hasn’t been cheery since the summer.”Like a lot of industries we’ve been on an 8- to 10-year growth period,” says Charles Straface, president of the $3 billion annual sales business unit that builds the “bones” of such products as trailers, trucks, cars, windows, and doors in more than 20 factories across North America. Last year, business was at a peak it hadn’t seen since 2006. This year things began to slow by 3% through July, which was still “pretty good.”

Now? “In the last two months we’re seeing pretty massive slowing,” Straface says. Truck and trailer order rates are down between 50% and 70%. General distribution, a proxy for smaller machine shops and fabricators, is off by 4% to 7%. Automotive is down by 4%. The only question the business has is whether 2020 brings a 5% to 10% correction from a previous high or a 20% to 40% recession-type contraction. “I don’t know the answer to that,” Straface says.

Many manufacturers face similar questions. Some will pull through because they’ve been preparing for some time with innovation of technology and marketing strategies or have ridden industry rising industry trends. Others, though, might find the coming year difficult.

Crystal ball

There have been disquieting signs. The September jobs report showed a loss of 2,000 manufacturing jobs versus a gain of 18,000 at the same time last year. The Purchasing Managers Index (PMI), a manufacturing strength indicator from the Institute for Supply Management, dropped below 50 in August—a sign of industry contraction—and last month further fell to 47.8, the lowest number since 2009. Prices contracted for the fourth straight month. The result drove a nearly 500-point drop in the Dow.

A slowdown has been obvious on many factory floors. Curt Doherty, CEO of CNC Machines, a reseller of metal manufacturing equipment to manufacturers, previously told Fortune he saw a slow summer and only half of the fall sales uptick he normally expected. Things have continued along the same trend. “We’re having to get creative to land more deals than we used to,” he says.

Some things keep growing

There’s uncertainty for many companies and challenges in a global economy.

“More industrial manufacturing of certain large volume types of products [like construction and agricultural equipment] are slowing down,” says Jim Huber, COO and executive vice president of BHS, a St. Louis-based manufacturer of custom material handling equipment. But manufacturing for use in North America “for the moment continues to remain at a high level.”

Trade in China remains confusing. Donald Trump claimed victory in recent negotiations. However, China Daily, a news outlet of the country’s government, notes a breakthrough appears to have happened, “based on its past practice, there is always the possibility that Washington may decide to cancel the deal if it thinks that doing so will better serve its interests.” Companies can’t be sure of what their strategies should be.

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