Manufacturers Say Volatility Increases Need for Payments Certainty

Imports and exports are fluctuating wildly. The long-term strategy behind the tariff negotiations and renegotiations — with a July 9 deadline for new trade deals — has been to bring manufacturing back to the United States.

But there are signs that the sector remains volatile, in terms of supply and demand, as well as prices. PYMNTS Intelligence data has detailed the value of real-time payments and external working capital solutions in smoothing supply chains and frictions.

To that end, and as detailed in the Tuesday (July 1) report from the Institute of Supply Management, the U.S. manufacturing sector continues to be squeezed by the aforementioned uncertainty, marking its fourth straight month of decline in June, though the pace of that contraction has been moderating.

The PMI (manufacturing purchasing managers’ index) was 49, up from 48.5 in May, but it must be noted that a PMI reading below 50 represents a contraction. New orders slipped to a 46.4 reading, down from 47.6 in the prior month.

In comments accompanying the report, the chair of the ISM, Susan Spence, stated: “The Prices Index remained in expansion (or ‘increasing’) territory, registering 69.7%, up 0.3 percentage points compared to the reading of 69.4 percent reported in May.”

The prices are tied to the input costs paid by the manufacturers, including raw materials and components. Readings above 50 indicate that the inputs are getting more expensive on the heels of inflationary pressures.

Last month, for goods companies — which includes manufacturing firms — the share of product leaders feeling “highly certain” they could cope with the vagaries of tariffs sank to 5% in April from 37% in March and 40% in February. According to the PYMNTS Intelligence report “2024-2025 Growth Corporates Working Capital Index: North America Edition,” commissioned by Visa, firms in the manufacturing and construction segments kept up their already high utilization rates of banking offerings, with 97% using external working capital solutions.

These middle-market firms generate $50 million to $1 billion in annualized revenues. One manufacturing executive told PYMNTS that using external working capital offerings led to better prices as the solutions “gave us power to negotiate with suppliers for procuring raw materials.”

PYMNTS Intelligence also found that faster payments, as in the instant kind of transaction, have had positive impacts up and down supply chains. Amid the smaller firms surveyed, more than half of suppliers overall said that they were paid late.

A whopping 92% of manufacturers said that real-time payments — in terms of sending them to suppliers — helped improve these B2B relationships. Eighty-four percent of firms that received those instant payments said the same thing about cementing strong relationships with their counterparts.

There are indications that the sector has been moving away from less efficient payment processes. PYMNTS’ deep dive into the sector in 2023, among 125 manufacturers, real-time payments accounted for 15% of outbound and 14% of inbound B2B transactions by manufacturers, so there’s been room for improvement.

“From the buyer’s perspective,” we wrote, “drivers for using real-time payments include security,” which was cited by 57%, and the ability to track and confirm payments, which was valued by 52% of respondents.

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