The Institute for Supply Management (ISM) announced their quarterly index for manufacturing growth this quarter through November was up to 57.3 percent, which is a significant improvement over the 56.4 percent reading announced in October. Any percentage over 50 is considered a sign of market growth. This is the highest growth seen in two and a half years. Following a lull in the spring of this year, manufacturing has shown a six month pattern of growth. In a separate report released by the Commerce Department, construction spending also saw an increase, but this increase was driven more by government spending than by home or general business growth. This is the strongest growth in that market seen in the past four years.
However, though manufacturing is up overall, reports from individual factories tell a different story. Chief U.S. economist at MFR Inc. Joshua Shapiro believes that the ISM index is telling a brighter story of the overall economy than actually exists. Orders for long lasting factory goods were down for the month of October, and orders for durable goods (those meant to last three years) fell by two percent. Orders for aircraft, machinery, metal parts, and computers were down.
Part of the difference in these stories could stem from the fact that ISM does not include smaller factory operations in their index. Hence, larger companies which gain more from export orders in recovering economies such as Asia and Europe are driving the index up, even as smaller companies which depend mostly on domestic orders continue to struggle in the U.S. economy.
Another reason for the difference is likely due to an increase in orders for non-durable goods. These include food, textiles, petroleum, chemical and paper products. The recent government shutdown could have also driven down orders for durable goods, skewing the numbers.
Global Procurement & Supply Chain Professionals Read This…
…Carefully curated procurement & supply chain issues that make you look smart, sent to your inbox every week.