How is the economy really performing? In this Supply Chain Byte, Lisa Anderson breaks down key economic indicators—GDP, inflation, and the labor force—along with insights on the expanding manufacturing sector. Learn what manufacturers should be doing now to stay ahead in a shifting landscape.
Overall, the economy is performing well. GDP growth was 2.9%, which is in alignment with the 3% goal. Since 2019, the economy has grown faster than all major countries at 11.5%, showing the strength of post-pandemic growth. Labor metrics are also in good shape with low unemployment levels. On the other hand, the labor participation rate remains around 1% down since pre-pandemic levels. Although 1% doesn’t sound significant, it relates to huge numbers of people. If you are looking for high-skilled resources, you will understand the challenge of the lower participation rate!
On the other hand, inflation remains stubbornly high. It was around 2.9% as compared to the 2% target, mainly fueled by massive government spending following the pandemic. In fact, housing doubled since 2020. Since housing is a significant cost, it has a massive impact on affordability. From that viewpoint, the threat of tariffs has created a lot of controversy as tariffs can be inflationary if companies add the cost direct to consumers. As we discussed in our article, Impact from the Threat of Tariffs in the Supply Chain, tariffs are being used as a negotiating tool. With that said, some tariffs will take effect although countries and companies can absorb the tariffs or likely defer them while they move production to the United States. Thus, it is expected that tariffs will be mildly inflationary at first although as it powers manufacturing, it will drive substantial economic growth. According to the National Association of Manufacturers, for every $1 put in manufacturing, $2.69 is added to the overall economy.
On a positive note, manufacturing turned into expansion territory for the first time in almost a year. The Purchasing Managers’ Index read at 50.9 with anything above 50 considered expansionary. Manufacturing has been flat since 2000 with the push to global. This is likely to become the pivot point to manufacturing growth.