2017 was a strong year for the American manufacturing industry. According to research from the Institute for Supply Management (ISM), the country’s manufacturing sector experienced its best year since 2004. And with purchase orders flooding in, manufacturers believe this trend will continue through 2018 and beyond.
So, how did the ISM conclude that 2017 was the best year for American manufacturing since 2004? ISM researchers based their findings on the industry’s average index. As explained by Investopedia, the ISM Manufacturing Index is a rating used to measure the overall health of the manufacturing industry. To create the Manufacturing Index, ISM researchers survey more than 300 of the country’s leading manufacturing companies, asking them a variety of questions regarding employment, purchase orders, growth and more. The survey specifically focuses on 19 categories and is based on the North American Industry Classification System (NAICS).
Technical jargon aside, any Manufacturing Index above 50 indicates growth, whereas ratings below 50 indicate contraction. According to the ISM’s latest findings, the average monthly Manufacturing Index in the U.S. manufacturing industry was 57.6 last year. That’s the highest monthly average for the industry in 13 years, attesting to the industry’s strong growth.
So, what fueled the American manufacturing industry’s strong growth in 2017? Researchers say several factors influenced the industry’s growth and expansion, one of which was increased domestic business investment. With investors pouring money into U.S. manufacturing firms, the industry responded by growing. Secondly, U.S. consumers are spending more money than in the past. According to Reuters, consumer spending in the United States grew at its fastest pace in 2017 since 2009. And when consumers have more money to spend, suppliers — including manufacturing companies — reap the benefits of increased sales.
The combination of increased domestic business investments, increased consumer spending and new innovations fueled the American manufacturing industry’s strong growth last year. On the other hand, however, manufacturing companies have complained in recent months that finding highly skilled talent is difficult. That’s not necessarily a bad thing, though. If there’s a need for skilled workers, it usually means jobs are available; thus, contributing to lower unemployment levels.
The good news is that researchers expect the American manufacturing industry will continue to grow and expand throughout the year. The ISM’s survey suggested that capital spending in the manufacturing sector will slow this year. However, most analysts believe the industry, overall, will continue to grow. As a result, manufacturing companies, employees and consumers will all benefit from the manufacturing industry’s strong growth.
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