December marked the end of a rough year for the U.S. manufacturing industry. It saw several consecutive months of job cuts, prompting analysts to issue a warning about the industry. But it appears that things are turning back around for the U.S. manufacturing industry, as we’re seeing strong gains thus far in January.
According to the preliminary US manufacturing purchasing manager’s index (PMI) by Markit, January received a 52.7 score. To put that number into perspective, analysts had predicted just a 51 score. Before this score, the U.S. manufacturing industry was given a 51.2 score, which was not surprisingly a 38-month low. When the PMI score is above 50, it’s characterized as healthy grown and expansion. When the PMI score is below 50, the market is considered to be shrinking and weakening.
Of course, 2015 was a rough year for the U.S. manufacturing industry. While the value of the dollar grew, it prompted a lower demand for products to be manufactured here in the states. Subsequently, this led to slower growth. And furthermore, China’s decision to devalue its currency is also believed to have impacted the manufacturing industry.
As any market analyst will tell you, however, what goes up must come down — and vise-versa. In the wake of a rough 2015 for the U.S. manufacturing industry, things are beginning to turn back around. Markit chief economist Chris Williams attributed this growth to a combination of increased demand for made-in-USA products, as well as producers shrugging off worries about China.
“Producers appear to have shrugged off worries about China, helped by export orders showing signs of reviving,” said Markit chief economist Chris Williamson. “It looks like weak demand from China is being offset by improved demand for US-produced goods in other markets.”
If you delve deeper into the report, you’ll see that it also reveals gauges of manufacturing factory inventories had contracted in December. In November of last year, it was 43, but in December had contracted to 43.5. Again, this is largely attributed to the ripple effects created by China’s market adjustment.