By Matt Rosen, Manager, and April Mays, Staff Accountant
While the overall economy experienced a 42nd consecutive month of growth in November 2012, the manufacturing sector suffered a contraction for the fourth time in the past six months, according to the Institute for Supply Management’s most recent Manufacturing Report on Business.
Highlighted this month is the contraction in employment. The index is at its lowest point since September 2009 and ends a streak of 37 months of growth. The contraction is logical considering the declines seen in exports (six months of contraction), order backlogs (eight months of contraction) and the slowing growth of new orders over October.
The overall economic contraction within the industry is due in part to the fiscal cliff of looming tax increases and big spending cuts, which some believe will move the economy back into a recession.
“The principle business conditions that will affect the company over the next three or four quarters will be the U.S. federal government tax and budgetary policies,” one survey respondent said. “The impact of those policies is not yet clear.”
While this holds true for manufacturing, it also applies to the economy at large. Of the 18 manufacturing industries surveyed, six reported growth and eleven reported contraction, indicating the industry is responding to the delicate state of the economy.