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U.S. Manufacturing Set to Close 2013 on High Note

02 December 2013

The U.S. manufacturing sector will close the second half of 2013 on a high note if trends tracked by the Institute of Supply Management (ISM) continue on course. The ISM's leading index, the PMI, registered 57.3 percent in November, an increase of nearly 1 percentage point from October's reading of 56.4 percent.

The PMI has increased each month since June. November is the highest reading for the year so far.

A PMI of more than 50 percent indicates the economy is growing; an index under 50 percent indicates contraction.

"It's been a great second half," said Brad Holcomb, chair of the Institute for Supply Management Manufacturing Business Survey Committee. "In the first half of the year the PMI averaged 51.5 percent; in the second half the average has been 56.2 percent."

Although the high-tech sector continues to grow, feedback from the computer and electronics manufacturing sector indicates sequestration and government spending cuts continue to be a concern. "This sector has been under pressure for a while," Holcomb said. "It's unclear as to when it might turn around."

There was noticeable jump in the ISM's employment index for November, which increased to 56.5 percent from 53.2 percent in October. This month's reading indicates expansion in employment for the fifth consecutive month, at a faster rate than in October.

These are not seasonal jobs, Holcomb said; the ISM strips seasonality out of its indices. "What this says to me is that manufacturing is feeling the momentum of the second half of the year and it doesn't want to be caught short on labor and employment," Holcomb said.

The new orders index increased in November by 3 percentage points to 63.6 percent, and the production index increased by 2 percentage points to 62.8 percent. With 15 of 18 manufacturing industries reporting growth in November relative to October, the positive growth trend characterizing the second half of 2013 is continuing.

Of the 18 manufacturing industries tracked by the ISM, 15 are reporting growth in November in the following order: plastics and rubber products; textile mills; furniture and related products; primary metals; food, beverage and tobacco products; paper products; printing and related support activities; petroleum and coal products; miscellaneous manufacturing; electrical equipment, appliances and components; transportation equipment; chemical products; computer and electronic products; nonmetallic mineral products; and fabricated metal products. The three industries reporting contraction in November are: apparel, leather and allied products; wood products; and machinery.

"This is a great, balanced report," Holcomb said. "Exports are high, which indicates the world likes our products and our prices." Based on the data from the second half of 2013, the ISM and its business committee remain optimistic for the first quarter of 2014, he added.

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