ONLINE EXCLUSIVE: Hopeful Signs Appear in Manufacturing
Jeannette Spalding
Market reporting outlets from Bloomberg to the Wall Street Journal have covered the recent Institute for Supply Management’s (ISM) Manufacturing Report on Business that said economic activity in the manufacturing sector expanded in November for the 28th consecutive month and the overall economy grew for the 30th month in a row.
The manufacturing purchasing managers’ index (PMI) reached the 52.7-percent mark, which represents a 1.9-percentage point hike from October's reading of 50.8 percent, reported Bradley J. Holcomb, CPSM, CPSD, chair of the ISM Manufacturing Business Survey Committee. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.
The ISM report also showed that the New Orders Index increased 4.3 percentage points from October to 56.7 percent, reflecting the second month of growth after three months of contraction. While the Prices Index, at 45 percent, increased 4 percentage points from the October reading of 41 percent, prices of raw materials continued to decrease (registering below 50 percent) for the second consecutive month, Holcomb said.
“[Survey] respondents cite continuing concerns about the general economic environment, government regulations and European financial conditions, but are cautiously more optimistic about the next few months based on lower raw materials pricing and favorable levels of new orders,” he said. The latest ISM survey results were announced in a Dec. 1 release by the Tempe, AZ-based institute.
Bloomberg reported this data in its Dec. 1 story, “Manufacturing Growth in U.S. Defies China Slowdown: Economy.” Bloomberg also compared this data to its own survey of economists, who project a factory index gain to 51.8. Bloomberg also reported, “The manufacturing figure was punctuated by gains in orders and production in the same month that consumer confidence rebounded and companies beefed up their payrolls.
“We are an oasis,” Bloomberg quoted Chris Low, chief economist at FTN Financial in New York as saying. “The rest of the world might slow when the U.S. slows, but the U.S. doesn’t necessarily slow down when the rest of the world slows.”
The Dec. 5 Wall Street Journal (WSJ) story, “Factory Orders Decline,” offered a more mixed view of manufacturing. The WSJ story did address ISM’s positive survey results, but led with U.S. factory orders falling a second straight month during October, suggesting that “manufacturers were having difficulty gaining ground amid a soft economy.” Of the ISM results, WSJ said, “The factory sector is growing — just not very fast” and that “economic weakness is restraining manufacturers.” On a brighter note, the same article reported “the latest Federal Reserve data showed U.S. industrial production climbed in October more than expected and that industries increased their use of capacity.”
Meanwhile, CNBC’s Brian Shactman pondered the potential for a comeback in U.S. manufacturing jobs in his Dec. 1 “Energy and Jobs” column. The manufacturing cost spread between China and the United States is not what it used to be, he noted. “As the U.S. jobs economy continues to sputter, the cost spread will continue to shrink, and many companies will decide to make things on U.S. shores because the upside could spark sales if the price isn't too far off,” he said.
