Manufacturing Stays Steady Through October Despite Headwinds
Manufacturing conditions in the United States continued to improve in October despite the partial government shutdown, according to reports published by Markit Economics and the Institute for Supply Management at the beginning of November. Although the two disagree about the speed of the recovery, both reports show that manufacturing business activity increased at least modestly.
According to ISM, business activity within the manufacturing sector actually accelerated for the month. Its headline purchasing managers’ index increased from 56.2 to 56.4, its fifth consecutive month of growth. New orders increased fractionally to 60.6, although the index for production fell from 62.6 to 60.8. The index for employment showed decelerated growth at 53.2, but growth nonetheless.
Markit, on the other hand, reports that manufacturing sector growth decelerated in October. Its headline PMI index fell from 52.8 to 51.8 on the month, still indicating growth but at a more modest rate. The component index for output fell dramatically from 55.3 to 50.6. New order growth also decelerated, with the index falling from 53.2 to 52.7. More importantly, though, the index for employment grew, climbing from 51.3 to 52.7.
The reports are broadly consistent with industrial production data released by the U.S. Federal Reserve on Friday. Overall industrial production contracted 0.1 percent on the month in October, but manufacturing production increased 0.3 percent, its third consecutive gain. Manufacturing production is up 3.3 percent on the year.
October’s decline in headline industrial production was the product of a 1.6 percent decline in mining production and a 1.1 percent decline in utilities. The industrial production index is compiled by the Federal Reserve using data from the Bureau of Labor Statistics and various trade organizations. Growth in industrial output has struggled to remain positive over the past 12 months on the back of a fickle recovery in overall economic conditions, but small victories have come more often than not.
How to interpret these victories — the modest or fairly consistent reports of growth — is up for debate. The data signal that the manufacturing industry is hobbling along and is threatened with contraction at every turn, but it’s unclear whether this is a sign that the sector itself is still weak or that the economic climate is still too weak to support anything more.