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IndustryNet Blog

U.S. manufacturing activity picks up speed

Posted by IndustryNet on Wednesday, January 3, 2018

100000164autoworkerLed by a surge in new orders, U.S. manufacturing activity expanded at a faster rate in December, according to new data released this morning by the Institute for Supply Management.

The ISM survey of manufacturing executives shows U.S. industrial activity picked up speed, edging up 1.5% to a current reading of 59.7%.

December marks the 16th consecutive month of growth in the manufacturing sector, and the 103rd month of growth for the U.S. economy overall.

A surge in new orders led December’s growth, according to the ISM’s key metrics, and was also boosted by an uptick in production, supplier deliveries, and exports. However, employment expanded at a slower rate, and customer inventories continue to shrink.

Sixteen of the eighteen industries surveyed by the ISM reported growth, led by machinery; computer & electronic products; paper products; apparel, leather & allied products; printing & related support activities, and primary metals. Wood products and textile mills were the only two sectors to report a contraction.

Multiple reports point to growth in the nation’s industrial sector

U.S. manufacturing has accelerated in recent months, despite a temporary setback triggered by the 2017 hurricane season, which weakened the ISM’s reading for manufacturing activity in October.

The most recent Department of Labor report shows the U.S. added 228,000 jobs in November, with the manufacturing sector accounting for 31,000 of those jobs. IndustryNet’s December reports indicates significant employment growth in the U.S. packaging and conveyor industries, as well as a remarkable growth in manufacturing employment for the state of Utah.

Looking ahead, the tax reform bill signed into law on December 22nd, is set to have a major impact on the nation’s manufacturing sector, with lower tax burdens, expedited business expensing and other pro-business measures included in the bill, having the potential to ignite investment and increase hiring.

A recent National Association of Manufacturers survey indicates support for the bill among the nation’s manufacturers is extremely strong, with 94% of those surveyed expressing an improved business outlook in the last quarter of 2017 as the bill began to take shape.

Enthusiastic responses from supply executives

Responses from multiple supply executives reflect a strengthening manufacturing sector, with some citing increased demand in the wake of last year’s devastating hurricanes.

One respondent in the rubber/plastics industry stated: “Demand at this time is strong in the construction part of our business. I think it is due to the impact of the hurricanes and the rebuild and new construction that is required.”

Others spoke of greater international sales heading into 2018. “Strong international sales – Europe and Australia – versus last two years,” responded an executive in the machinery sector. “U.S. sales continue to grow. Seeing commodity pricing pressures.”

New orders surge, production climbsU.S. manufacturing activity picks up speed

Highlighting this month’s ISM report was a significant increase in the New Orders Index, which surged by 5.4% to 69.4.

New orders have been in expansion territory for the past 16 months, and December’s New Orders reading of 69.4 marks the index’s highest level since 2004.

Fifteen out of eighteen industries reported an increase in new orders, with machinery; apparel; leather & allied products; primary metals; and computer and electronic products leading growth.

Industrial production also notched up, with December’s Production Index reading at 65.8 – 1.9% higher than November’s reading.

Like the New Orders Index, the Production Index has been expanding for the past 16 consecutive months, and has not been this strong since 2010.

Thirteen of eighteen industries reported an uptick in production, reports the ISM. Interestingly, apparel, leather & allied products lead December’s growth in production, followed by machinery, paper products, computer & electronic products, petroleum & coal products, and others.

Other key categories expressing growth included prices (+3.5%); exports (+2.5%); inventories (+1.5%) and supplier deliveries (+1.4%).

Employment strong, but skills gap intensifies

One of the more interesting aspects of the ISM’s December report is the shift in employment index, which notched down by 2.7% -- though hiring remains in expansion territory at 57%.

Industries reporting the strongest employment growth included primary metals; machinery; computer/electronics; paper products and transportation equipment.

Employment declined in just two industries: apparel, leather & allied products, as well as fabricated metals products.

One supply executive in the paper products sector remarked: “All suppliers are reporting strong business activity and difficulties obtaining qualified employees.” This sentiment is echoed by the ISM’s Semiannual Economic Forecast, which found 65% of supply executives experienced difficulty finding workers.

manufacturing workerThe continued dearth of skilled workers remains a top challenge across a spectrum of industries in the U.S., with a notable report compiled by the Manufacturing Institute and Deloitte anticipating the sector will experience a 2-million-worker shortfall in the next ten years.

Customer Inventories was the only additional ISM category demonstrating a slowdown in December.

The Customers’ Inventories Index continues to contract, falling by 3.5% to 42.0, with production levels still not high enough to maintain an acceptable level of customer inventory, according to the ISM. The index has been contracting for several months now, hitting a low of 41% in August.

The Manufacturing ISM® Report On Business® is based on data compiled from purchasing and supply executives nationwide at the Institute for Supply Management (ISM).

 


Related articles:
Spotlight on U.S. conveyor manufacturers
What the tax reform bill means for U.S. manufacturing
Box companies in the U.S. see sales, jobs trend up
Utah manufacturing companies continue to expand

 

 

 

 

 

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