Monday, October 4, 2021

U.S. Manufacturing Surging

 Financial FAQs



Growth in the U.S. manufacturing sector is exploding, according to the Institute for Supply Managers Report on Business. Output is up 17 percent in Q2 2021 YoY (per FRED graph). It is a  sign of good economic growth for the rest of this year, in spite of supply shortages and higher prices for raw materials.

Reporting growth in September were 16 of the 17 manufacturing industries. The top seven — in the following order — were: Furniture & Related Products; Petroleum & Coal Products; Machinery; Electrical Equipment, Appliances & Components; Computer & Electronic Products; and Chemical Products.

“The orders index was unchanged at the prior month’s very high level of 66.7 and the supplier delivery index rebounded by four points to 73.4.  The overall result was a 1.2-point increase to 61.1.  Any number over 50 percent indicates that a majority of those surveyed saw increases, and reaching 60 for any length of time is highly unusual,” according to the ISM survey announcement.

“There have been 15 ISM composite index readings of 60 or more in the past thirty years.  Seven of them have come in the past ten months,” said Reuters. This is in spite of the supply-chain delays and soaring product prices. The ISM Prices Index registered 81.2 percent. In September, 17 of 18 industries reported paying increased prices for raw materials.


Even better news is that consumer spending is holding up, which powers some two-thirds of economic activity. This may be because consumers are paying less attention to the pandemic as the infection rate falls and the third Pfizer booster shot becomes available.

This is while Consumer spending grew at a robust 12.0 percent rate in the April-June quarter. The Commerce Department also said construction spending increased 8.9 percent on a year-on-year basis in August. Separately, the University of Michigan's Consumer Sentiment Index rose to a final reading of 72.8 in September from 70.3 in August.

Another sign of robust future growth (as shown in the Reuters graph) is that Disposable income was $2 trillion higher than Personal outlays--$18 billion vs. $16 billion, respectively—which is why the personal savings rate is holding at a high 9.4 percent.

And the NY Times just reported drug maker Merck announced Friday that its pill to treat Covid-19 was shown in a key clinical trial to halve the risk of hospitalization or death when given to high-risk people early in their infections. It probably won’t be available until late next year, however.

The supply-chain delays and healthy consumer pocketbooks show there is a very strong demand for goods and services that should last, even with the ongoing uncertainty over the coronavirus pandemic.

Now let us see what congress will do with the Biden administration proposals for infrastructure and social investments, no matter the final Dollar amount. If passed, I see a very prosperous decade for Americans.

Harlan Green © 2021

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