High-value manufacturing rose in November to an eight-month high according to independent analysis by the financial data firm Markit and the Institute for Supply Management (ISM). Both companies survey the market on behalf of manufacturing companies. They use somewhat different methodologies, but they have come to very similar results: not only was November a month of growth, but it also appears to be part of a general upward trend in high-value manufacturing. It's worth examining why.
Both Markit and the ISM surveyed November's high-value manufacturing output, pored over employment data, and asked the management of various manufacturing companies about the business climate. Each independently generated an index of greater than fifty, which is usually a sign of industry growth.
Together, these results paint a picture of growth in high-value manufacturing—in the best light the sector has enjoyed in over two years. The ISM index rose in November to 57.3, its highest point since the spring of 2011, and the Markit results showed even more dramatic growth for the month. Markit's US Manufacturing Purchasing Managers Index, which polls purchasing managers in the manufacturing sector, was set at 54.3, up from 51.8 in October.
Markit explains the sudden jump as a rebound from October's nearly flat growth, which was caused primarily by the partial government shutdown. The firm also credits a rise in overseas demand for high-value manufacturing during the same period. Within the flash survey, which is intended as a preliminary assessment for Markit's annual report, more positive indicators suggest a rise of 0.6 percent for the fourth quarter of 2014 and a full 2.3 percent for the year.
Interestingly—or sadly, depending on your perspective—this rise in output for high-value manufacturing did not coincide with strong employment figures. Jobs are still being created in the sector, but at a much lower rate than the main index would suggest. Markit's employment subindex fell from a weak 52.7 to only 52.2. This poor job growth in the midst of a general expansion of high-value manufacturing is a dilemma for the Federal Reserve, which has cited employment figures and low inflation as reasons to continue its stimulus program of quantitative easing into the new year in an effort to further stimulate growth.
It's always good to hear that an economic indicator is turning positive. For workers and managers in the manufacturing sector who have almost come to expect bad news, a general expansion in high-value manufacturing is just the energy the industry needs. Sluggish job growth remains an issue, but the numbers seem to have stabilized and are set to rise in the new year.
(Photo courtesy of freedigitalphotos.net)
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