In 2024, the United States manufacturing industry is experiencing unprecedented dual challenges: declining demand and rising costs. According to the latest United States Institute for Supply Management (ISM) manufacturing index, the PMI in August was 47.2, below the boom-bust line of 50 for the fifth consecutive month, indicating that manufacturing activity continues to contract. In this article, China Exportsemi Web will try to analyze the causes of these difficulties in depth and explore their far-reaching impact on the United States economy and the global market.
Weak demand is the primary challenge
First of all, the decline in demand is the main reason for the downturn in the manufacturing sector. ISM's new orders index fell to 44.6 in August, down 2.8 percentage points from July, reflecting a significant reduction in market demand for new products. Declining consumer confidence, slowing global economic growth, and uncertainty over trade policy are all potential causes. In particular, tensions between the United States and its major trading partners have led to a decline in export orders, further impacting manufacturing output.
Rising costs pose a second pressure
Rising costs are also putting significant pressure on manufacturers. The ISM price index climbed to 54.0 in August, indicating an increase in spending by manufacturers on raw materials. Tight global supply chains, especially in areas such as semiconductors and critical metals, have further pushed up raw material costs. In addition, rising ocean and air freight costs have also contributed to manufacturing costs.
Figure: The dual dilemma of United States manufacturing: weak demand and high costs
Manufacturers adjust their production to cope with the decline in demand
Faced with weak demand, manufacturers have had to adjust their production strategies. The production index fell to 44.8 in August, suggesting that manufacturers are reducing production to reduce inventory overhang. However, a drop in production could result in idle capacity, impacting overall efficiency. At the same time, rising inventory levels also indicate an uncertain market outlook. The inventory index rose to 50.3 in August, reflecting manufacturers' cautious attitude towards future demand.
The job market is under pressure and policy uncertainty is heightening
The job market in the manufacturing sector is also showing weakness. Although the employment index rose to 46 in August from 43.4 in July, it is still in contraction territory, indicating a decrease in employment opportunities that could adversely affect consumption and market demand. In addition, the Federal Reserve's monetary policy and the upcoming United States election have made companies more conservative in their investment and hiring decisions.
Some sectors are showing resilience and growth opportunities
Despite the poor performance of the overall manufacturing industry, industries such as computers and electronics have expanded, reflecting technological advancements in specific areas and increased market demand. Especially with the trend of remote work and online education, the demand for electronic devices and technology continues to rise. The growth of these industries has brought some positive signals to the United States manufacturing industry, as well as other areas to respond to market weakness.
Global competition and geopolitical implications
Global competition and geopolitical factors are also putting pressure on United States manufacturing. The trend of reshoring of manufacturing, the impact of geopolitical conflicts (such as the Russia-Ukraine war) on European manufacturing, and the new energy strategy of United States all affect the global competitiveness and market share of United States manufacturing.
Market opportunities for Chinese semiconductor companies
The complex manufacturing landscape in United States provides important market insights for Chinese semiconductor companies. Understanding these challenges and adjusting strategies can help Chinese companies better adapt to the United States market and seize potential opportunities. In this process, Chinese companies can promote technological innovation and reduce the risks caused by market volatility by strengthening cooperation with United States companies, and ultimately achieve long-term sustainable development.
Epilogue:
The current predicament of United States' manufacturing industry is the result of a combination of factors, including falling demand, rising costs, weak employment, and policy uncertainty. It is critical for policymakers and industry players to have a better understanding of these factors and to respond effectively. At the same time, these changes also provide strategic guidance for Chinese semiconductor companies to go overseas, which is conducive to their successful layout and sustainable development in the United States market.
