Slow, Steady Growth in Manufacturing SectorAugust 04, 2016
Brett C. Bushnell, CPA
A recent report by the Institute for Supply Management (ISM) indicated that United States manufacturing companies have shown growth for the past three months, the first sustained growth seen in the manufacturing sector since last summer. However, while there is still overall expansion in the industry, it hasn’t come at the rate to which we had grown accustomed in 2014.
The ISM, a trade group of private company purchasing managers, indicated that its Purchasing Managers’ Index (PMI)— which surveys hundreds of manufacturing companies—was 51.3 in May, up from 50.8 in April and the third straight month of the positive industry growth. And following what had been five straight months of contraction in the industry, this should be taken as encouraging news – any index above 50 indicates a manufacturing company is generally expanding.
Additionally, there are positive signs with continued growth, beginning with the fact that the overall economy has grown now for 84 consecutive months. When you think back to the not-too-distant Great Recession of 2008-09, which many felt led to a grim outlook for future years for American manufacturing, this is an impressive turnaround. Seven straight years of growth is not something that was expected, but it’s no doubt welcome news.
More positive news emerged from the ISM report in the areas of new orders, production and imports/exports. All show a positive index:
- New orders are at 55.7, the fifth straight month of growth.
- The production index stands now at 52.6, also the fifth straight month of growth.
- Exports experienced their third consecutive month of growth in May, with the index at 52.5, while imports have remained in the positive range with an index of 50 for the second straight month.
In Connecticut, with our proud manufacturing base and an impressive history of innovation, while we see signs of growth – particularly in the aerospace supply chain with the ongoing ramp-up in aerospace manufacturing – there remains the concern that the state is not doing enough to support its vital manufacturing base. The numbers are on our side nationally, but they need to be matched locally with a strong commitment to what has been one of Connecticut’s leading business sectors for nearly a century.
What comes next? Connecticut and U.S. manufacturers will likely make investments in their workforces where they are able and remain dependent on the availability of new, younger skilled workers.
Billions of dollars of investments are being made in facility and equipment upgrades, businesses are actively looking for new talent to augment aging workforces and more companies are choosing to “re-shore” jobs and operations here at home. We are now seeing very real signs that the United States is ready to re-emerge as a leader in global manufacturing, and Connecticut needs to keep pace.
While the growth rate is slow, it is once again moving in the positive direction after nearly half a year in the negative, and there are enough indicators that U.S. manufacturing continues to move ahead. Our work is nowhere near done, as the ISM report shows, but the roadmap is there for a bright manufacturing future.
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