Manufacturing Recovers as Demand for Durable Goods Soars

Manufacturing

Source: http://www.flickr.com/photos/usnationalarchives/

The data is in, and the news is good. Manufacturing conditions improved more than expected in November, according to the U.S. Census Bureau’s Advance Report on Durable Goods. New orders for manufactured durable goods — things like appliances, electronics, vehicles, and capital goods — increased by $8.2 billion, or 3.5 percent, on the month. Excluding new orders for transportation equipment, which can be subject to seasonal and cyclical volatility, durable goods orders increased 1.2 percent. Economists had expected a much more modest increase of 1.5 percent, or of 0.8 percent excluding transportation equipment.

The durable goods data echoes a positive outlook that emerged from November’s Industrial Production report, released by the U.S. Federal Reserve. The Fed’s index for industrial production increased 1.1 percent on the month after increasing just 0.1 percent in October. Economists had expected an increase of 0.6 percent for November. The headline index — which is comprised of three major industry groups: manufacturing, mining, and utilities — is now up 3.2 percent on the year. The index for the manufacturing industry segment increased 0.6 percent in November and is now up 2.9 percent on the year.

The durable goods new order data also confirm the strong outlook that emerged from purchasing managers indices maintained by the Institute for Supply Management and Market Economics. Both indices, which measure the health of the manufacturing industry in similar ways, hit their highest levels since January in November. Each PMI is determined by conducting a survey of industry executives, and a reading above 50 indicates growth.

The ISM Manufacturing Report on Business showed a 0.9 percentage point increase in its headline PMI, from 56.4 to 57.3, indicating accelerating growth. The new orders component jumped 3 points to 63.6, production climbed 2 points to 62.8, and employment grew 3.3 points to 56.4. Markit’s U.S. Manufacturing PMI climbed 2.9 points to a 10-month high of 54.7, also indicating accelerating growth. The output component jumped 6.8 points to 57.3, new orders climbed 3.5 points to 56.2, and employment decreased 0.4 points to 52.3.

Markit chief economist Chris Williamson noted that U.S. manufacturing has continued to grow despite the fiscal uncertainty, economic malaise, and partial shutdown. “Large companies are leading the upturn, having escaped the impact of the shutdown, with output and new orders growth rending higher in recent months.”

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