Growth Continues for U.S. Manufacturing, But Warning Clouds Ahead

Oct. 1, 2010
ISM index shows 14th straight month of growth, but has slid to lowest levels of the year.

Manufacturing continued to grow through September, making it the 14th straight month of growth, but economists warn that the pace was weaker than anticipated.

Sales for products such as cars, furniture, factory machinery and various other manufactured goods have helped pull the U.S. economy out of its recession, largely on the strength of overseas demand in restocking supplies.

But that rapid growth has slowed over recent months, as the Institute for Supply Managements manufacturing index slid down to 54.4 in September, a drop from 56.3 in August, and its lowest level of 2010.

Though any reading over 50 indicates growth, the index is noticeably down from recent months, such as its 60.4 mark in April, which has worried both economists and manufacturers alike.

While the headline number shows relative strength this month as the PMI reading of 54.4 percent is still quite positive, the overall picture is less encouraging, said Norbert Ore, head of the ISM business survey committee, in a statement.

For as battered as the manufacturing industry has been in recent years, shedding an estimated 2.2 million jobs from December 2007 through the end of 2009, it has been one of few areas that has seen consistent growth.

Industrial companies, for instance, have made up nearly 20% of net hiring by businesses this year, even though only a tenth of the private sector workforce is made up by manufacturing. According to recent government figures, 145,000 manufacturing jobs have been added to the economy in 2010.

Nevertheless, that growth is still moving slower than expected.

Manufacturing has enjoyed a stronger recovery than other sectors of the economy, but it appears that weaker growth is the expectation for the fourth quarter, Ore said.

Figures on inventories and orders backlog, he added, are sending strong negative signals of weakening performance in the sector.

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