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Manufacturing Slides Into Recession

By AICC Staff

March 20, 2023

The Institute for Supply Management publishes a monthly report on economic activity in the manufacturing sector based on survey responses from several hundred supply chain managers across the full spectrum of manufacturing in the U.S. Recent reports show a faltering expansion in factory output, and many forecasters expect the slowdown to continue this year.


According to that survey, the manufacturing sector contracted for the second consecutive month in December, following 29 months of expansion. As shown in the chart above, the overall index clocked in at 48.6% in December when only two of 18 industry sectors reported growth: petroleum and coal products, and primary metals. Thirteen sectors, including paper products, contracted in December, according to survey respondents.

Labor management sentiment continued to shift, with several panelists’ companies reducing employment levels through hiring freezes or attrition.


Demand, which had been bolstered by resilient consumer spending during the year, weakened in December. The New Orders Index fell to 45.2%, marking the third consecutive month of shrinking sales. Export orders also contracted markedly, reported at 46.2%, while backlogs were at historically low levels.

As the overall economy seems to be heading toward slower growth or perhaps a contraction later this year, demand for manufactured goods is not likely to grow at the pace experienced during the past two years.


While overall manufacturing activity faltered, production of nondurable consumer goods, the largest consumer of boxes and related packaging, continued to show monthly gains as the year came to a close. Through November, production of these fast-moving goods had risen by 2.9%. The details of 2022 food production statistics are summarized in the second chart above.

Food makes up one of the largest components of nondurable goods, and most food products are intense consumers of paper packaging. Food production remained elevated throughout the past year and had grown by 4.5% during the year through November, as shown in the third chart above. Total food production consistently outpaced its prior-year output for a total of 21 consecutive months ending in November.


Even though total food production rose by 4.5% through November, individual food product categories showed a range of change. The table above shows the year-to-date percentage production growth for a range of foods.

For those interested in exploring the range of products for which monthly growth indexes are published by the Federal Reserve Board, visit and select Industrial Production and Capacity Utilization.


Inflation became a major economic factor during 2022. Between November 2021 and November 2022, the consumer price index rose by 7.1%. The just above shows the breakdown of retail sales by business for the past year through November. However, those data are not adjusted for inflation, so they need to be discounted for inflation. The year-to-date growth rate of all retail and food service sales was 9.6% as initially reported, but after considering the impact of inflation, growth was more in the range of 2%–3%.

Food service accounts for some 13% of retail and food service sales and was hardest hit for the longest time during the COVID-19 pandemic. Its recovery rate of 17.6% this past year just barely brings them out of the depression the pandemic placed them in.

The largest single channel of retail sales has become sales made by nonstore retailers—mostly e-commerce sales. These sales accounted for 15.8% of retail sales this past November, having unseated general merchandise and department stores as the largest retail sales channel. Growth of online sales remained in double digits this past year, measuring 10.2% through November.

Food and beverages sold for off-premises consumption at food and grocery stores accounted for 11.8% of sales during the same period and grew at 7.8% through November—relatively flat considering the impact of inflation.

Sales of building materials grew around the same rate as food and beverages this past year, and elevated growth will likely continue in the aftermath of destructive weather.


Dick Storat is president of Richard Storat & Associates. He can be reached at 610-282-6033 or


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