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Manufacturing: The Little Engine That Just Won't Quit

Recent softening in manufacturing sector doesn't necessarily translate into long-term stagnation.

An often overlooked irony in business is that the U.S. manufacturing sector—long besieged by outsourcing, profit margin pressures, and not-so-friendly regulations—has been one of the key drivers in the tepid economic recovery. For several quarters, in fact, manufacturing employment had been on the rebound, rivalling the job growth seen in other bellwether categories such as health care.

In recent months, however, that momentum appears to have lost some steam. According to the U.S. Federal Reserve, industrial production fell in June, July, and August, mirroring job losses in manufacturing over the same period. After rising by 25,000 positions in July, manufacturing employment fell by 15,000 positions in August, followed by a loss of another 16,000 in September, Bureau of Labor statistics show.

Other key manufacturing indicators provide supporting evidence of softening. Case in point: the telltale PMI Index, which measures confidence among purchasing executives. In June, July, and August the PMI index readings were 49.7, 49.8, and 49.6, respectively, reflecting the contraction seen in the general U.S. industrial production numbers. (Note: A PMI reading below 50 percent indicates that the manufacturing economy is generally contracting.)

Those who view the glass as “half full,” however, paint a less dire scenario. “It is typical for orders to slow during July and August,” said Douglas K. Woods, president of the Association for Manufacturing Technology, or AMT. For July, AMT reported that U.S. manufacturing technology orders totaled $449.69 million, down 2.3% from June and off 10.5% when compared to July 2011. Woods said he fully expects order activity to “come back strong” in the coming months.

A similarly optimistic near-term prognosis comes from the Precision Metalforming Association (PMA), whose recent survey shows metalforming companies expect a slight uptick in business conditions during the next three months. According to the November report—19% of participants anticipate that economic activity will improve during the next three months, up from 15% in October.

Then there’s the supportive “anecdotal” research. More than a few FABTECH exhibitors I spoke to said they have more business than they can handle, and that they are very encouraged by what they see in terms of orders in the pipeline. Mind you, many of these vendors are purveyors of pricey, heavy-duty equipment who report that their clients are becoming more comfortable in making significant capital improvement investments.

So, if you ask me if I’m confident that the manufacturing engine will continue to chug along, my answer is simple: I’m sure it can…I know it can.

--Reginald Tucker
 

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