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Several Market Indicators Predict Strong Growth in U.S. Manufacturing

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Several economists and market analysts are predicting strong growth in the U.S. manufacturing sector as the country leads the rest of the world out of the deep recession which has nearly crippled growth in most developed nations over the past several years. The Institute for Supply Management index rose to 55.7 percent during the month of August, which was unexpected. This is the highest level the index has been for two straight years. Any reading of this index above 50 percent indicates growth in manufacturing. 

Bloomberg’s median forecast, a survey of leading economists regarding the index, was 54 percent. U.S. manufacturers are leading the global recovery of manufacturing, followed by China and European nations, as economies in all of these regions gradually improves. One key factor driving the growth in manufacturing is strong vehicle sales in the U.S., which is prompting large automakers like Ford Motor Company to expand their production facilities.

Other factors driving the growth in manufacturing include construction. As construction orders continue to rise, this also drives the need for increased production in sectors which supply materials for new construction projects, including growth in building materials orders as well as increased orders for appliances and furniture.

According to Brian Jones, the senior economist at Societe Generale in New York City, U.S. manufacturing experiences a solid quarter to begin the second half of the year, and he predicted a nearly exact index reading of 55.8 percent. He says businesses are expanding their productions to meet growing demand, but also builders are increasing their inventories, which is further driving the need for manufacturing. He predicts worldwide manufacturing is on the rise.

In another recent report, construction spending grew in July to the highest level it’s been at in the past four years. Outlays are up .6 percent to an annual rate of $908.8 billion, which is the highest level it has been since June of 2009, according to the U.S. Department of Commerce. This followed a month which saw little change in construction spending.

The Institute for Supply Management is based in Temple, Arizona.

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