U.S. Economic Snapshot: Manufacturing Sector

Manufacturing is stronger the more you look at the numbers

   
U.S. Economic Snapshot: Manufacturing Sector

On Monday Wall Street woke up to news that U.S. factory orders fell 0.6% in April. Covering both durable and non-durable goods, this Commerce Department report offers a comprehensive snapshot of manufacturing, so the report was enough to push the major indices down at market open.

Now, at face value, this seems like a lukewarm report for U.S. manufacturing. But in this case, the details of this report are actually pretty good. To start, the 0.6% dip in April followed a 2.1% drop in March, so the measure is firming up thanks to a jump in orders for transportation equipment and primary metals. Additionally, factory goods orders are currently 39% higher than the recession low reached in March 2009.

Most importantly, economists expect this trend to reverse in the next few months; in fact, they expect manufacturing to emerge as one of the U.S. economy’s bright spots. And that’s because several measures of U.S. manufacturing have been on the mend in recent months:

  • Industrial production (the amount of output from the manufacturing, mining, electric and gas industries) rose 1.1% in April—over twice the rate forecast by economists. This also represents the strongest monthly gain since December 2010.
  • The Institute for Supply Management’s index rose more than expected to 53.5—any reading above 50.0 indicates expansion of manufacturing activity.
  • Manufacturing employment rose by 12,000 in May; this sectors added 495,000 jobs since its low in January 2010.This sector is benefitting from rising demand for U.S. exports as well as robust car sales.

This Friday, we’ll receive word about wholesale inventories in April.  This report covers sales and inventory figures from the second stage of the manufacturing process. We’ll also receive the April Consumer Credit report on Thursday and the U.S. Balance of Trade Report on Friday.

Both of these reports have the potential to move the market, so I will keep close tabs on them and let you know immediately if any important developments arise.


Article printed from InvestorPlace Media, http://investorplace.com/2012/06/u-s-economic-snapshot-manufacturing-sector/.

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