The Economy

U.S. Manufacturing Grows At A Slower Pace

March 1, 2005

ISM's Economic Activity Index Dips To 55.3% In February.

The manufacturing sector of the U.S. economy continued to grow in February, as it has for 21 consecutive months. However, according to data released March 1 by the Tempe, Ariz.-based Institute for Supply Management (ISM), the pace of growth eased off to an index figure of 55.3%, more than a percentage point below both January's revised figure of 56.4% and economists' forecast of 56.9% in February.

A figure above 50% indicates that the manufacturing sector of the economy generally is growing; a figure below 50% signals that the sector is contracting.

Among manufacturers, new orders, production and employment still grew in February, but more slowly than in January. New orders were down seven-tenths of a percent to 55.8%. Production fell to 56.7% in February, down 1.1 percentage points from January. And employment fell seven-tenths of a percentage point to 57.4%. One positive sign: Inventories moved from 52.8% in January, which indicated they were growing, to 48.6% in February, a sign they were contracting. "This reduces possible concerns about involuntary inventory build," says Norbert J. Ore, chair of ISM's manufacturing business survey committee.

Meanwhile, a study from PricewaterhouseCoopers (PwC), a business services firm, says U.S. manufacturers remain upbeat about the economy even as they are increasingly concerned about foreign competition, energy prices, currency exchange rates and decreasing profitability. An impressive 84% of the 76 senior manufacturing executives PwC recently surveyed believe the U.S. economy is still growing and 82% say they are optimistic about the U.S. economy's prospects during the next 12 months. However, they see foreign competition, energy prices, exchange rates and decreasing profitability as substantial threats to future economic growth, and they've started scaling back revenue targets, new investments and hiring plans. They have, for example, reduced projected revenue growth during the next 12 months to an average of 7.8% from the 9% average they foresaw three months ago.

According to the Manufacturers Alliance/MAPI, an Arlington, Va.-based business research and public policy group, 15 of the 27 manufacturing industries it surveys were in the recovery phase of the business cycle at the end of 2004. Aerospace was in the early stage of recovery. Industrial machinery, basic chemicals, mining and energy machinery, and pharmaceuticals were at the mid point of recovery. And 10 others -- including instruments, power equipment, material handling equipment, iron and steel products, electrical equipment and paper -- were nearing the peak of their growth.

About the Author

John McClenahen | Former Senior Editor, IndustryWeek

John S. McClenahen, is an occasional essayist on the Web site of IndustryWeek, the executive management publication from which he retired in 2006. He began his journalism career as a broadcast journalist at Westinghouse Broadcasting’s KYW in Cleveland, Ohio. In May 1967, he joined Penton Media Inc. in Cleveland and in September 1967 was transferred to Washington, DC, the base from which for nearly 40 years he wrote primarily about national and international economics and politics, and corporate social responsibility.

      McClenahen, a native of Ohio now residing in Maryland, is an award-winning writer and photographer. He is the author of three books of poetry, most recently An Unexpected Poet (2013), and several books of photographs, including Black, White, and Shades of Grey (2014). He also is the author of a children’s book, Henry at His Beach (2014).

      His photograph “Provincetown: Fog Rising 2004” was selected for the Smithsonian Institution’s 2011 juried exhibition Artists at Work and displayed in the S. Dillon Ripley Center at the Smithsonian Institution in Washington, D.C., from June until October 2011. Five of his photographs are in the collection of St. Lawrence University and displayed on campus in Canton, New York.

      John McClenahen’s essay “Incorporating America: Whitman in Context” was designated one of the five best works published in The Journal of Graduate Liberal Studies during the twelve-year editorship of R. Barry Leavis of Rollins College. John McClenahen’s several journalism prizes include the coveted Jesse H. Neal Award. He also is the author of the commemorative poem “Upon 50 Years,” celebrating the fiftieth anniversary of the founding of Wolfson College Cambridge, and appearing in “The Wolfson Review.”

      John McClenahen received a B.A. (English with a minor in government) from St. Lawrence University, an M.A., (English) from Western Reserve University, and a Master of Arts in Liberal Studies from Georgetown University, where he also pursued doctoral studies. At St. Lawrence University, he was elected to academic honor societies in English and government and to Omicron Delta Kappa, the University’s highest undergraduate honor. John McClenahen was a participant in the 32nd Annual Wharton Seminars for Journalists at the Wharton School at the University of Pennsylvania in Philadelphia. During the Easter Term of the 1986 academic year, John McClenahen was the first American to hold a prestigious Press Fellowship at Wolfson College, Cambridge, in the United Kingdom.

      John McClenahen has served on the Editorial Board of Confluence: The Journal of Graduate Liberal Studies and was co-founder and first editor of Liberal Studies at Georgetown. He has been a volunteer researcher on the William Steinway Diary Project at the Smithsonian Institution, Washington, D.C., and has been an assistant professorial lecturer at The George Washington University in Washington, D.C.