Just One More… Post on the State of U.S. Manufacturing Today

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Posted by: briansittley Comments: 0 0 Post Date: December 16, 2014

MFG_PIC2After the prior three posts about trends in the economy and manufacturing, we thought we were done with the topic for awhile, but… sure enough, next day the Wall Street Journal points up even further positive indications for the manufacturing sector, which we felt must be shared…
Around December 1, the Journal’s “Ahead of the Tape” column reminded us (in an article entitled “U.S.’s Forgotten Economic Engine”) that when it comes to the U.S. economy, yes, manufacturing still matters.
In 1980 one in four private-sector jobs was in manufacturing.  Today, that figure is just one in ten.  But as Journal writer Justin Lahart duly points out, this ignores a lot of other workers (truck drivers, forklift operators) who aren’t employed in manufacturing but still depend on it.
They go on to use a measure of manufacturing’s real impact on the economy: “Final sales of U.S. made goods.”  That’s the dollars fetched by goods produced in this country.  It turns out, they represent fully one-third of the U.S. GDP.  And it’s this “goods” sector that tends to “provide most of the fuel to changes in DGP, driving it up in good times, and down in bad,” according to Lahart.
And U.S. manufacturing does indeed appear to be doing well.  The Institute for Supply Management’s index showed activity in October rose to 59 from 56.6 in September, well above the 50 line that divides expansion from contraction.  That’s a high number for such an index, and a slight slip in November (to 58.7) was neither unexpected nor alarming.
The Journal article goes on to point out that “the backdrop for manufacturing looks like it will be good for awhile.”  While the stronger dollar hurts, costs go down when oil declines as it has, and cheap natural gas further bolsters the economics of producing goods in the U.S.
Finally, he notes, the “pickup in factory activity may reflect an economy that has entered a healthier stage, with increased hiring encouraging companies to step up production, and stronger production necessitating yet more hiring.”
In short, it would appear that manufacturing is on its way to a very nice year in 2015.
So, Happy New Year indeed to all our manufacturing-based customers (which is most of them).  We are all long overdue for such glad tidings.

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