U.S.manufacturing revival continues to divide opinion

February 6, 2013

Depending on which side of the fence you prefer to sit, U.S. manufacturing is either going through a revival or sluggishly moving at a glacial pace.

On the one hand, companies are reporting that orders are flowing in and that the industry is surging, while on the other, job creation remains slow and overseas demand for American made products is, according to CNN, “tapering off.” This has left some economists to question the true state of the industry and to consider whether, or not, the claims of a renaissance may have been premature.

According to Reuters, manufacturing growth “quickened” in January while hiring was also seen to increase, with economists reporting that the sector was boosted by a “surge in domestic demand.” At the same time, overseas markets remained fairly stagnant and America’s competitors in the Asia-Pacific region showed a “gentle rebound,” evidence it would seem that U.S. manufacturing continues to be a global leader.

“The data suggests the underlying health of the industrial sector continues to improve and rising production will help the economy return to growth in the first quarter, providing there are no set-backs in coming months,” commented Chris Williamson, a chief economist at Markit.

With setbacks hard to predict, the general consensus appeared to be that manufacturing companies could look forward to a bright 2013, with many of them still prudently employing the principles of lean enterprise.

However, according to CNN, the industry is experiencing little or no growth, with data from the Bureau of Labor Statistics showing that manufacturing companies only added 4,000 new positions in January, while some analysts claimed that the future, far being bright, was in fact “murky.”

“The release of pent-up demand is tapering off,” said John Lonski, chief economist at Moody’s Capital Markets. “The value of exported manufactured goods rose just 4% in 2012. That export slowdown comes mostly from slowing growth abroad, rather than a fundamental loss of competitiveness in the Untied States.”

But in many ways, that “slowing down” of exports fits in with the perception of a domestic revival. Americans are continuing to buy stuff, especially products that show a commitment to quality management in manufacturing. The recent release of the ISM report for January showed an industry that was expanding, not contracting, and while growth appears to be slow, the fact that something grows shows forward momentum.

Manufacturing has undoubtedly endured its fair share of peaks and troughs since the economic downturn of 2008, but it still forms the backbone of the U.S. economy and, as such, the temperature of the industry is likely to remain on the sunny side of the fence.