U.S. Manufacturing Industry Rebounds After Tough January

The winter was tough for the U.S. manufacturing industry. In January, it posted a rating of just 51.3 on the Institute for Supply Management’s index of national factory activity. The score was the lowest since May of last year. In February, the industry showed signs of rebounding by posting a score of 53.2, which topped the median forecast of an even 52. Any score over 50 is indicative of industry growth.

Consumer spending habits during the brutal winter months played a major role in the low score. “While households spent more on services such as utilities and health care in January, they cut back on goods, including autos, gasoline and clothing, underscoring the importance of bigger job and income gains needed to spur the biggest part of the economy,” Lorraine Woellert notes.

February’s score stopped the trend of two straight months of slowing growth, but is still far behind the peak reading of 57 in November, the highest since April 2011. However, if the growth trend continues, especially past expectations, it could be possible for that score to be reached again in 2014.

Industry experts suggest that growth would have been greater if not for a shortage of parts during the winter. While that slump might seem problematic, it could be a signal that orders will continue to improve in order to replenish stockpiles. In turn, the industry could see growth.

“The ISM’s orders gauge increased to 54.5 from 51.2, while a measure of orders waiting to be filled rose to 52 from 48. The pickup in demand and backlogs points to a rebound in production, which may have been hampered by inclement weather,” Woellers says. Without slowdowns caused by the inclement weather, companies should be better able to meet customer demands.

One thing that members of the industry should watch is the employment index, which held firm at 52.3. Movement of that number could be a great indicator of the health and progress of the industry moving forward.

“Manufacturing remains a bright spot for the economy,” said Russell Price, senior economist at Ameriprise Financial Inc. “There’s still a sizable amount of pent-up demand in the consumer and corporate sectors.”

Sources:
http://www.reuters.com/article/2014/03/03/us-usa-economy-manufacturing-idUSBREA2218R20140303
http://www.bloomberg.com/news/2014-03-03/u-s-ism-manufacturing-index-rose-to-53-2-in-february-from-51-3.html

Leave a Reply

Your email address will not be published.