American manufacturers continue to contend with lower demand as well as high costs for health care, raw materials and energy. As if this weren't enough, a crumbling infrastructure and switch in the Oval Office present more supply-chain risk and more unknowns.

Is economic recovery coming soon or is it still far off?

Manufacturing has cooled as spending has slowed, reports Bloomberg News. The Institute for Supply Management's (ISM's) Purchasing Manager's Index, remained at 48.6 repeating March's figure.

A reading of 50 is the dividing line between expansion and contraction. New orders remained the same, prices increased 1 percent, imports jumped 3 percent, exports grew 1 percent, supplier deliveries rose 4 percent but customers' inventories fell 6 percent.

However, among manufacturers, there were weak gainers and worse-off losers. ISM's scorecard:

The industries reporting growth in April — listed in order — are: computer and electronic products; miscellaneous manufacturing; printing and related support activities; paper products; transport equipment; machinery; furniture and related products; and chemical products.

The industries reporting contraction in April are: wood products; textile mills; apparel, leather and allied products; electrical equipment, appliances and parts; plastics and rubber products; fabricated metal products; petroleum and coal products; food, drinks and tobacco; and nonmetallic mineral products.

While down, manufacturing has so far performed better during this slowdown than in previous contractions as demand from overseas continues to grow. In February 2001, a month before the last recession, the Institute's index was 42.1.

Yet the price problem creates the greatest challenge. The ISM Prices Index registered 84.5 percent in April, showing manufacturers are paying higher prices on average when compared with March. This is the highest reading for the index since it registered 86 percent in May 2004, says the ISM.

Though last week, prices for commodities dropped slightly, the outlook calls for more increases. "Chile's worst drought in five decades and power rationing from South Africa to China mean the price of aluminum, gold, copper and platinum will keep climbing as the lights go out in the world's biggest mines," according to a Bloomberg News report.

Therefore, goods producers are caught between suppliers requiring more money and consumers who have less confidence in many businesses who continue to shed jobs as a catalyst for cost cutting. Depending on how much cash they have, there's only a limited time before producers will stop subsidizing consumers who will only buy at the lowest price.

The manufacturing contraction results partially from events that started last year.

The private goods-producing sector declined 1.5 percent in 2007, the first downturn in real value added for this broad sector since 2001. The contraction was largely because of the steep decline in construction and the slowdown in mining, as the U.S. Bureau of Economic Analysis has noted.

Also, the private goods-producing sector's current-dollar share of the economy fell to 18.9 percent in 2007, its lowest share on record. Even "mining value added" grew less than 0.1 percent in 2007 after growing 6.1 percent in 2006.

Based on your business' outlook, do you think the economy will turn around substantially by year's end?

Resources

Payrolls Probably Shrank, Growth Slowed: U.S. Economy Preview
by Courtney Schlisserman
Bloomberg.com, April 27, 2008

April 2008 Manufacturing ISM Report on Business
Institute for Supply Management, May 1, 2008

Downturn in Finance and Insurance Restrains Real GDP Growth in 2007
U.S. Bureau of Economic Analysis, April 29, 2008

U.S. Economy: ISM Services Index Unexpectedly Climbed (Update1)
by Shobana Chandra
Bloomberg.com, May 5, 2008

Metals Surge as Rationing Cuts Power at Biggest Mines (Update1)
by Saijel Kishan and Gavin Evans
Bloomberg.com, May 5, 2008

Services May Have Cooled, Home Sales Fell: U.S. Economy Preview
by Shobana Chandra
Bloomberg.com, May 4, 2008