Manufacturing Recovery Means Doing More With Less

Manufacturing

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

Manufacturing conditions in the United States continued to improve in November, according to 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.

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.

Purchasing and supply executives mostly had positive comments. A respondent from chemical products said that the “Outlook for the remainder of the year and into 2014 is trending positive,” and several noted that conditions were better-than-normal for this time of year. The component for order backlogs increased 2.5 points to 54.0.

On the downside, a few executives commented that sequestration and uncertain fiscal policy were creating headwinds. An executive from the computer and electronic products industry said that cutbacks in defense spending were impacting business.

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,” Williamson said in the Markit report. “SMEs suffered a bigger shutdown impact, but saw growth rebound again in November. Similarly, while employment rose in SMEs, it is larger firms that are driving job creation.”

Total manufacturing employment has recovered more slowly than overall conditions. Total manufacturing employment fell from about 14 million before the crisis to lows around 11.5 million, and has since recovered to just about 12 million. This type of weak labor market growth has appeared in several industries where business activity is improving but employment has been slow to catch up. Firms have instead driven growth more by increasing output per person instead of increasing headcount. This can be indicative of economic uncertainty, which is still below its pre-October shutdown level, according to Gallup.

Don’t Miss: One Person Who Won’t Be Running for President? Mi e Obama.chell