2019 was undoubtedly a recession for manufacturing, with the Institute of Supply Management (ISM) manufacturing index falling to 47.8% in September – the lowest since 2009. The ISM remained below 50% (breakeven level) from August 2019 until the end of the year. Many manufacturing companies saw a reduction in sales orders and decreased demand for products, which may have been worsened in-part by the U.S. trade war with China.
Despite the slump in the manufacturing sector, service-based companies (such as hospitals, banks, and retailers) and the overall economy saw expansion throughout last year. So is there opportunity for manufacturing conditions to improve in 2020, and more importantly, freight capacity? We’re remaining optimistic.
There are a few indicators that manufacturing may be on the cusp of recovery.
- Increases in global PMIs (purchasing manager indexes) and demand are adding to the signs of improvement. “With some resolution on the trade front, we should see improvement in trade volumes which naturally allows for greater manufacturing activity,” says Global Economic Weekly.
- Service-based companies are growing steadily, and in turn, manufacturing will have to meet the rising demands of those businesses.
- The last 2 times the manufacturing ISM fell below 50% in these economic conditions, the global economy and service-based companies helped to stimulate manufacturing growth.
So what does this mean for freight?
We’ve seen a record number of trucking companies close their doors in the last year. As the manufacturing sector begins to recover, shippers will have to work harder to cover their shipments because there will be less capacity and more freight in the market.
One of the best options for shippers during a manufacturing recovery is to align with a reputable third-party logistics company like Route. Our sole purpose as an organization is to create shipping solutions that address those gaps in capacity.