U.S. Manufacturing Grows at Fastest Pace in More Than a Year

[Purveyor]

Last edited Fri Jul 1, 2016, 12:35 PM - Edit history (1)

Source: Bloomberg

July 1, 2016 — 10:00 AM EDT
Updated on July 1, 2016 — 10:41 AM EDT

Factory activity expanded in June at the fastest clip in more than a year, an encouraging sign that American manufacturers are gaining traction.

The Institute for Supply Management’s index increased to 53.2 last month, the highest since February 2015 and exceeding the most optimistic projection in a Bloomberg survey of economists, from 51.3 in May, data from the Tempe, Arizona-based group showed Friday.



Improving consumer spending is helping pull manufacturing out of a prolonged slump that began in early 2015 as a surging dollar hurt exports and the slump in oil prices curbed investment in the energy industry. Strengthening indexes of bookings and production, which reached three-month highs, signal factory gains will be sustained.

"Manufacturing output has been close to zero for the past year, and hopefully the rise in the index is a sign that the pace of deterioration in some manufacturing industries has stabilized,” said Ryan Wang, an economist at HSBC Securities USA Inc. in New York who forecast that the factory gauge would improve. “Manufacturing firms that produce consumer goods continue to see solid demand.”

Read more: http://www.bloomberg.com/news/articles/2016-07-01/u-s-manufacturing-expands-at-fastest-pace-in-more-than-a-year

[AllyCat]

1. I blame President Obama

We were headed just fine into the abyss. And now this!

[whatthehey]

2. Sliding for over a year?

Rather misleading, and only plausible if you understand this is a growth rate reduction, not a reduction in overall manufacturing. The latter lasted about 4 months and was over long ago (anything above 50 indicates growth).

[forest444]

4. They've been trying to substitute the (highly subjective) PMI for industrial prod. numbers for years

Forget the hard numbers, the reasoning goes; what really matters is how executives "feel."

[whatthehey]

5. No, "they" really haven't

Despite what lazy reporters and innumerate readers may imply and infer, the PMI index is known by anyone vaguely competent to be an indicator which serves as an approximate proxy for the much more complex measure of manufacturing sector volume. It's been around since just after WW2 and is a pretty decent comparison factor (0.77 correlation coefficient, when anything over 0.65 is normally considered a strong correlation) for GDP growth.

https://docs.google.com/spreadsheet/oimg?key=0Ao3oY4RWbJaUdFRsX1M3NXFQUVRyRGZVVlNwbHMyc2c&oid=6&zx=yqvd6d21cekw

[forest444]

6. Point well taken

Even if the correlation in your chart is only for a 6-year period, a casual glance at the entire series shows that GDP change and PMI do indeed tend to coincide somewhat - with the caveat that the upward anomaly in PMI (compared to GDP growth) always seems to happen when Republicans are in office.

The Bush regime is a good case in point. Aside from the first 3 years (when they correlated pretty well), the PMI was consistently much higher in relation to the state of the economy - and certainly to the state of manufacturing - than would normally be expected. In fact it remained slightly positive as late as mid-2008, when the economy was already in a deep recession.

Compare that to the Clinton era, when it took but a slight chilly breeze to send the PMI plunging downward. Since it's no secret that purchasing managers are overwhelmingly Republican (many, vehemently so), it naturally follows that subjective sentiments play at least some role in the PMI index.

[nolabels]

3. In more than a 'Yea' ?

Okay i'll buy it