I think it’s safe to say the United States manufacturing industry has rebounded, as new reports indicate that U.S.-based factories have expanded for the fifth consecutive month in July.
There’s been some concern among manufacturers in recent years, largely because the dollar has increased its value. It may sound somewhat contradictory, but as the U.S. dollar grows, the manufacturing industry weakens. According to the Institute for Supply Management (ISM), however, the country’s manufacturing index for July was 52.6 — indicating positive growth. We’ve talked about this before on our blog, but any manufacturing index above 50 signals positive growth. When the index drops below 50, it signals a recession.
With a recent manufacturing index of 52.6 (for July), the country’s manufacturing index is growing — and growing strong. This isn’t the highest index it’s ever been, but it’s certainly not the lowest. It’s still well above 50, signaling growth and expansion for this critical element of the country’s economic infrastructure.
Employment in the manufacturing industry, however, contracted in July. A separate report released and published in the U.S. Labor Department reveals that factories have slashed nearly 30,000 jobs over the past 12 months. How exactly is the manufacturing industry growing and expanding even when it’s cutting jobs? Well, it’s not uncommon for industries to grow amidst poor employment numbers, and manufacturing is no exception. The market itself may grow and remain profitable, although many companies are still forced to cut jobs.
Another element that’s likely playing a role in the country’s current manufacturing industry is the UK’s decision to leave the European Union. When voters finally voiced their desire to leave the European Union, it sent shockwaves throughout the entire global economy. A survey conducted by ISM found that more than one-third of US-based manufacturers believe the UK’s departure from the European Union would negative affect their business. Whether or not this true remains to be seen, but “Brexit” has certainly raised eyebrows among manufacturers here in the U.S.
As explained by Andrew Hunter, the ISM’s recent report suggests the country’s manufacturing industry is still recovering. “Overall, this suggests that the manufacturing sector is continuing to gradually recover,” said Andrew Hunter, U.S. economist at Capital Economics. Hunter added, however, that an ever-growing dollar also means that “a strong recovery in manufacturing activity remains unlikely in the near term.”
What do you think of the current state of the US manufacturing industry?