There’s been some concern among economists in recent months, fearing the United States’ manufacturing industry would continue to decline. While the industry has experienced somewhat stagnant growth as of late, it appears this trend has since reversed.
According to the Institute of Supply Management (ISM), the country’s manufacturing index increased from 50.8 in April to 51.3 in May. That marks the third consecutive month in which the manufacturing industry has experienced growth. Any manufacturing index above 50 signals positive growth, whereas anything below 50 signals a decline.
From October 2015 to February 2016, the country’s manufacturing index remained below 50, indicating a decline. But as any seasoned economist knows, what goes up must come down — and vise-versa. It was only a matter of time before the manufacturing industry turned back around in a positive direction, and it appears that time has finally come. With May being the third month in a row in which the U.S. manufacturing index rose above 50, I think it’s safe to say the industry is strong and well once again.
Prior to May 2016, the manufacturing industry struggled in part to a strong U.S. dollar that subsequently made products manufactured here more expensive than their foreign-made counterparts. But the dollar has since fallen, with other currencies gaining strength. This has made U.S. products cheaper, which in turn allows manufacturers to produce and sell more of them.
“Manufacturing has stabilized,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a research note. “The weaker dollar this year has already made a material difference to exporters.”
Over in China, however, investors are worried about the country’s manufacturing industry. Two new surveys revealed below-normal activity for China’s manufacturing industry. The Chinese Federation of Logistics and Purchasing also released an official index of 50.1 for the industry, meaning it’s growing but at an incredibly slow rate — such a slow rate that investors are afraid to funnel money into the industry.
Even with the positive manufacturing index in the U.S., some analysts are still concerned. The Commerce Department, for instance, reported just a few weeks ago that U.S. factories’ orders for non-perishable manufactured goods rose to 3.4%. That’s certainly good news, as 3.4% is steady growth in the right direction. What’s not good news, however, is that the Commerce Department said most of this growth was attributed to the commercial aircraft sector, which is extremely volatile and unpredictable.
What are your thoughts on the U.S. manufacturing industry? Do you think it will continue to rise, or it will it experience setbacks in the months to come?