Higher Energy Prices Slow U.S. Manufacturing's Growth

Sept. 1, 2005
The Institute for Supply Management (ISM) on September 1 offered fresh evidence that higher energy prices are slowing the pace of U.S. manufacturing. Its closely watched PMI index decreased to 53.6% in August, down three full percentage points from 56.6% ...

The Institute for Supply Management (ISM) on September 1 offered fresh evidence that higher energy prices are slowing the pace of U.S. manufacturing. Its closely watched PMI index decreased to 53.6% in August, down three full percentage points from 56.6% in July. A figure above 50% indicates the manufacturing sector of the economy generally is growing; a figure below 50% signals that manufacturing is contracting.

While new orders, production and employment among manufacturers continued to grow in August, they did so at a slower rate. Production was down 5.3 points to 55.9%, and new orders were down 4.2 points to 56.4%. Employment was down six-tenths of a point to 52.6%.

Many of the supply managers polled by Tempe, Ariz.-based ISM expressed about concern about their ability to sustain current levels of business if high energy prices persist, relates Norbert J. Ore, chair of the institute's manufacturing business survey committee.

Although he says the overall ISM index number signals manufacturing is growing "at a moderate rate," Daniel J. Meckstroth, chief economist at the Manufacturers Alliance/MAPI, confirms energy prices are taking a toll. "Econometric modeling indicates that manufacturing is three times as sensitive to oil prices as the economy as a whole," he explains. Its processes "are energy intensive, and its products are sensitive to reductions in consumer demand due to higher fuel prices."

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.
      

 

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