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Tuesday, September 2, 2014

Manufacturing Rises to Highest Point in 3.5 Years



Manufacturing is heating up and cranking out new products at a rapid pace. According to the Institute of Supply Chain Management, the August PMI rose to 59% (1.9% increase) when compared to the previous month’s numbers of 57.1%. The improvement is the highest experienced in 3 ½ years helping support the smooth running of America’s economic engine. Basic materials have a fundamental impact on the growth of manufacturing within their associated sectors as the products make their way throughout the national supply chain.

As the country seeks to capitalize on its new found growth it is important to ensure that a positive business environment employs and develops matching competencies in the manufacturing labor pool.  Economic expansion will have a difficult time continuing unless highly skilled and motivated employees are available to fill future employment opportunities.  Companies should bolster education and training to secure a ready labor supply and raise income based on performance.

Of the total of 18 industries measured 17 achieved a level of growth. They are “Plastics & Rubber Products; Furniture & Related Products; Fabricated Metal Products; Apparel, Leather & Allied Products; Wood Products; Printing & Related Support Activities; Miscellaneous Manufacturing; Paper Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Chemical Products; Primary Metals; Transportation Equipment; Computer & Electronic Products; Machinery; and Electrical Equipment, Appliances & Components (1).” In competition with cheaper foreign imports, the Textile Mills is the only industry that predictably lost ground.

The type of industries experiencing growth is fundamental to improving manufacturing in other economic sectors. The basic supplies of manufacturers become resources for other arenas that further refine the materials into a final exportable product. As the fundamental industries grow it is also possible to envision secondary manufacturers picking up pace in the near term.

Backlogs of orders increased 3% showing demand is high in the near term and pushing opportunities for growth into the next quarter. Exports of manufacturing rose 2% and imports rose 4% enhancing an already voracious supply based appetite. Companies are starting to invest in the economy again and attempting to expand their capacities. Orders are matching expectations and some companies will need to wait to obtain supplies for expansion. Company strategic planning will become essential to capitalize on the improved market.

If you read the business news on a regular basis you may also notice that consumer confidence and spending are also rising in a way that supports sustainable growth.  A caveat is the increasing imports over exports. As American companies become stronger, nimble, and reach cost parity with low cost foreign suppliers it is hoped the numbers will slowly shift in the other direction. At present, if these basic materials are manufactured into higher quality exports the economy may raise its financial profile. 


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