GOOD NEWS FROM THE MANUFACTURING SECTOR – U.S.

 

These new quarterly reportings are showing particularly good news.

The Institute for Supply Management (ISM) is reporting that U.S. manufacturing growth remains strong with an overall growth index of 51.7 which is stronger than predicted by Wall Street (ref CTH).  An index above 50 indicates growth.  ISM also reports that the manufacturing growth for June is 54.1, following on last month’s growth of 51.3.  These figures indicate that new production investment is coming on line and beginning to deliver products from the orders that have been placed.  (It generally takes two years from the initial manufacturing production outlay – which began in 2017 – to start producing, after which it continues to increase in production efficiency.)  In addition to this good news, is the fact that, from the manufacturing employment index, one can see that manufacturers are hiring at a fast rate, and, thus, filling the jobs from new production facilities that are continuing to come on line.  Of additional interest is the fact that the June price index of 47.9 reflects a significant drop in manufacturing material prices from that of May’s 53.2 index (ref CTH).  This is interesting news, given that standard predictions have consistently been the gloom and doom belief that tariffs would cause U.S. manufacturing material prices to rise.  However, those materials prices are significantly lower in June, which will be resulting in the absence of consumer price increases.  According to recent analysis, this is due to two factors.  One is that global material supply is consistent but its demand is weak – it’s the U.S. material demand that leads the world.  Thus, the lesser costs reflect prices that were lowered to take into account that the U.S. is the biggest customer with the strongest demand (quantity of purchasing typically brings discounts in overall price).  And, a second is that it was expected that tariffs on Chinese goods would cause a rise in materials costs, and that that would then be translated into a consequent rise in costs of the products to the consumer.  China’s response, however, has been to subsidize (or lower) the export process, in effect reducing the costs of their materials being exported.  All-in-all, the manufacturing sector in the U.S. is showing very good results, with prospects that indicate that those will continue.

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