U.S. manufacturing rises while competitors drop across board

August 23, 2012

The U.S. manufacturing sector has seen a slight drop in activity in the past several months, but this decline may be coming to an end at a time when other regions of the globe are beginning to sputter.

According to Bloomberg News, the Markit Economics preliminary index of U.S. manufacturing increased to 51.9 in August, a rise from the 51.4 reading that was recorded in the previous month.

A reading higher than 50 in the purchasing managers’ measure indicates expansion in the sector. The median forecast in a survey of economists done by the news outlet was 51.5. Estimates ranged from 50 to 52, showing a wide range for the industry due to consumer uncertainty.

The immediate future for the American sector remains cloudy, however, as the slump that the European and Chinese economies are going through is beginning to weigh on the demand for goods that are made in the U.S. According to Bloomberg, there are also domestic factors that have been in play for months in the industry, as restrained consumer spending, which accounts for 70 percent of the economy, has been seen due to the relatively high unemployment rate.

The Labor Department noted that the number of Americans filing first-time claims for unemployment benefits rose to a one-month high during the week of August 12-18, as jobless claims jumped to 372,000.

Despite the relative uncertainty for the U.S. manufacturing sector, it is faring much better than its competitors. Both China and Europe saw significant contraction in their respective industries, and economists from these regions do not see a reversal of this trend anytime soon, according to Reuters.

"The indicators taken as a whole indicate a material slowdown in the pace of the world economy," said economist Philip Shaw at Investec.

His sentiment was mirrored by other analysts, especially for the euro zone. Since the region's manufacturing sector has been below 50, the point of contraction, for seven months, even a slight uptick was not enough to quell fears about an impending recession in the region.

"August's flash euro zone PMI does nothing to challenge the notion that the single currency area is now firmly in recession," said Jonathan Loynes, chief European economist at Capital Economics.