Tag: ISM

ISM: Manufacturers Have Begun to Move Beyond Winter Storms

The Institute for Supply Management’s manufacturing purchasing managers’ index edged slightly higher, up from 53.2 in February to 53.7 in March. This reflects modest gains in overall manufacturing activity since recent weather-related weaknesses. The good news was that production (up from 48.2 to 55.9) began expanding again. The pace of new orders (up from 54.5 to 55.1) also picked up a little, including export sales (up from 53.5 to 55.5).

The sample comments continue to note the negative impact of weather. A food and beverage leader put it bluntly when they said, “We need spring.” Others have begun to move beyond the winter struggles. For instance, a petroleum and coal products manufacturer said, “Business beginning to heat up, along with the weather.” Others noted their increasing optimism. This included the transportation equipment respondent who answered, “Business is good, and we are optimistic that orders will continue to come in at a decent pace.”

Hiring growth remains soft (down from 52.3 to 51.1), and sentiment continued to be lower than just a few months ago. The average PMI value from July to December of last year, for instance, was 56.3, with new orders and production averaging 61.8 and 62.6 during that time frame, respectively. Another positive was that the manufacturing sector has now expanded for 10 straight months.

Overall, manufacturers are cautiously optimistic about future sales and output, and there is hope that the momentum seen in the second half of 2013 return to produce strong returns for 2014. While growth in manufacturing activity remains below where it was at the end of last year, it appears that the drag from winter storms has begun to fade.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Monday Economic Report – February 10, 2014

Here is the summary for this week’s Monday Economic Report:

Hiring in the manufacturing sector continued to expand in January, averaging 15,500 per month since August. This uptick in employment for manufacturers has corresponded to the acceleration in product demand and production in the second half of 2013, with cautious optimism for 2014. However, the overall jobs numbers were disappointing for the second straight month. Nonfarm payrolls grew by just 75,000 and 113,000 in December and January, respectively, which was well below the consensus expectation of 175,000 and the 2013 average monthly gain of 193,500.

Some of the releases out last week show the negative impact that weather has had on activity. For instance, new factory orders declined 1.5 percent in December, with broad-based weaknesses in the durable goods sector pulling the data lower. Shipments were also down. Likewise, manufacturing construction spending fell 5.1 percent in December, which was notable because of a mostly upward trend from June to November. Overall construction activity edged marginally higher in December, boosted by strong residential construction activity, but nonresidential and public spending was down.

The Institute for Supply Management’s Purchasing Managers’ Index (PMI) report showed a considerable decline in manufacturing sentiment, down from 56.5 in December to 51.3 in January. The biggest declines were in new orders, output and employment, but the pace of export orders was off only slightly. The pace of export orders was off only slightly. This indicates that domestic factors were the main contributors of the decline.

Meanwhile, the U.S. trade deficit rose from $34.56 billion in November to $38.70 billion in December, but the deficit narrowed for 2013 as a whole. Petroleum was a major factor in the smaller trade deficit last year, with increased petroleum exports and fewer imports. Unfortunately, manufactured goods exports did not increase as much last year as we would have preferred, up just 2.4 percent in 2013 versus 5.7 percent in 2012. We hope stronger global economic growth will produce improved manufactured goods exports in 2014.

In other news, the Congressional Budget Office released its 10-year budget and economic outlook. The deficit will be $514 billion in fiscal year 2014, an improvement from the more than $1 trillion deficits in fiscal years 2009–2012 and the $680 billion deficit in fiscal year 2013. The report shows the growth of mandatory spending rising from $2.03 trillion in fiscal year 2013 to $3.74 trillion in fiscal year 2024. Because of this, federal deficits will start to rise again beginning in fiscal year 2017, with deficits exceeding $1 trillion in fiscal year 2022. With such facts, it should not be a surprise that 86.3 percent of manufacturers want policymakers to find a long-term federal budget deal that tackles the debt and deficit, including reining in entitlements.

This week, we will get new industrial production data on Friday. The last report showed manufacturing output rising at an annualized 4.2 percent rate in the second half of 2013, but we will see if the data show production easing somewhat in January due to weather or other factors. The consensus expectation is for modest output gains of roughly 0.3 percent. Other highlights will be the latest figures on consumer confidence, job openings, retail sales and small business optimism.

Chad Moutray is the chief economist, National Association of Manufacturers.

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ISM: Growth in Manufacturing Activity Slowed Considerably in January

The Institute for Supply Management (ISM) said that the purchasing managers’ index (PMI) slowed considerably to begin the new year, down from 56.5 in December to 51.3 in January. This report mirrors other recent releases which have shown weaknesses, with weather and the holidays dampening demand and output. Indeed, a couple of the sample comments referenced the poor weather conditions as a contributing factor.

The slower pace of growth in January came after five months of significant strength in manufacturing activity, particularly for sales and production, both of which had index values over 60 from August to December. On the positive side, the manufacturing sector has now expanded for eight straight months, having recovered from a number of challenges last spring. To the extent that weather was the main factor in the lower figures in January, we would hope to see better data in February and beyond. In fact, manufacturers remain “cautiously optimistic” overall about 2014, as seen in the comments provided by ISM and in other reports.

Looking specifically at the January data, the various components decelerated across-the-board. The index for new orders fell sharply from 64.4 in December to 51.2 in January, its slowest pace since last May. Production (down from 61.7 to 54.8), exports (down from 55.0 to 54.5), and employment (down from 55.8 to 52.3) were also lower. The slight drop in export orders suggest that the decline in sales were mainly attributable to domestic factors, with modest gains in international orders still prevalent. That is a good sign.

There continues to be modest hiring growth, but with a persistent hesitancy on the part of some firms to add workers. It will be interesting to see how the easing in employment growth seen in the PMI data translated into new manufacturing hires nationally, with the Bureau of Labor Statistics releasing new jobs data on Friday. Similar to the ISM data, manufacturing employment growth ended 2013 on a strong note, adding 16,000 net new workers on average between August and December.

The other notable element was the acceleration in pricing pressures. The index for raw material costs rose from 53.5 to 60.5, its highest level since February 2013. While inflation remains in-check for now, this figure suggests that some costs have begun to pick up.

In general, this report shows that manufacturers began 2014 with some softness, with winter weather dampening both sales and output. Overall, manufacturing activity was up strongly in the second half of 2013, and we hope that the January numbers prove to be just a respite in the rebound that we had been witnessing.

While we hope that the weaknesses seen in the ISM manufacturing report are temporary, these data also highlight some fragility of the current economy. With that in mind, manufacturers feel that it will be important for policymakers to adopt pro-growth measures that will allow the sector to flourish and to return us to the growth that we had been seeing a year’s end.

Chad Moutray is the chief economist, National Association of Manufacturers.

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ISM: New Orders Continue to Grow Strongly in December, with Some Easing in Other Measures

The Institute for Supply Management (ISM) said that the purchasing managers’ index (PMI) eased slightly from 57.3 in November to 57.0 in December. Despite the lower figure, the underlying report was a positive one overall. The ISM data has reflected expanding manufacturing activity for seven consecutive months. Moreover, the manufacturing PMI measures averaged 56.3 in the second half of 2013, a nice improvement from the 51.5 average seen in the first half of the year.

One of the strongest elements in the ISM manufacturing report continues to be the sales component. The index for new orders has exceeded 60 for five straight months, indicating an extremely healthy pace for sales growth. The new orders index rose from 63.6 in November to 64.2 in December. This increase appears to be primarily from domestic sales. The index for export orders dropped from 59.5 to 55.0 for the month, suggesting some easing in our sales overseas.

The production index also reflects strong growth, albeit with a marginal decline in its pace in December (down from 62.8 to 62.2). It averaged 61.7 from July to December, far exceeding the 52.6 average experienced from January to June.

Looking at other measures, hiring appears to be moving in the right direction, with modest employment growth overall. The employment index increased from 56.5 to 56.9. This was the fastest pace since April 2012. At the same time, inventory growth moved negative once more, down from 50.5 to 47.0, the first decline in stockpiles since August.

In general, this report shows that manufacturing activity in the U.S. grew strongly in the second half of 2013, with overall new business up significantly. The indices for new orders and production continue to reflect healthy increases, and manufacturers tend to be mostly upbeat about future activity, as evidenced by other indicators. Moving forward, it will be important for policymakers to keep the momentum going by considering pro-growth measures that will allow the sector to flourish and build on the progress seen over the past few months.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Monday Economic Report – December 9, 2013

Here is the summary for this  week’s Monday Economic Report:

The Federal Reserve Board’s Beige Book, released last week, suggested that the U.S. economy was expanding at a modest to moderate pace nationally. Other data were even more encouraging, including strong numbers for economic growth, manufacturing activity and overall hiring. For instance, the Bureau of Economic Analysis reported that real GDP increased by 3.6 percent during the third quarter, up from its previous estimate of 2.8 percent. This was the fastest pace of growth since the first quarter of 2012. One drawback in the report was that much of the increase stemmed from the restocking of inventories—something that will likely not be replicated in the current quarter. Yet, consumer and business spending also made significant contributions to the economy, with relatively healthy gains for goods exports and improvements in the financial positions of state and local governments.

The stronger domestic and global economy has helped buoy the manufacturing sector, with stronger sales and output seen since the beginning of the third quarter. The Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI) has soared to 57.3, its highest point since April 2011. This was the fourth straight month with the new orders index greater than 60.0, indicating very robust growth in sales. More importantly, export orders also had healthy increases, up from 57.0 to 59.5. With manufactured goods exports up only 1.9 percent year-to-date, the fact that our overseas sales were beginning to pick up was welcome news. Overall, the ISM report—while much more optimistic than other sentiment surveys—mirrors the mostly upbeat outlook within the sector. Yet, sample comments also note downside risks associated with government uncertainty—a lingering issue that has dampened demand on and off over the past few years.

Friday’s jobs numbers were another boost for the U.S. economy. Manufacturers added 27,000 net new workers in November, the most in any month since March 2012. Moreover, it appears that businesses have begun to accelerate their hiring in recent months. The average monthly job gain over the past four months (August to November) was 16,500, a definite sign of progress from the average decline of 8,000 in the five months prior to that (March to July). A similar pattern exists for nonfarm payroll workers, with the average over the past four months jumping to 204,000. The unemployment rate fell to 7.0 percent in November, a rate not seen since November 2008. Yet, despite the strong employment gains, hiring plans remain mostly modest at best over the next year, and manufacturers have accounted for just 3.3 percent of the net new job gains over the past 12 months.

Consumers have seen their spirits lifted recently, particularly as we move further away from the government shutdown. Preliminary data from the University of Michigan and Thomson Reuters indicate that consumer confidence has returned to where it was before the budget impasse, even as lingering anxieties persist. (Sentiment remains lower than it was over the summer.) As their attitudes about the economy have improved, Americans have also opened their wallets, albeit somewhat tepidly. Personal spending rose modestly in October, with higher purchases for both durable and nondurable goods. Perhaps more timely, “Cyber Monday” retail sales set a new record, even as overall spending gains have been mixed for the holidays.

Today, we will release the results of the latest NAM/IndustryWeek Survey of Manufacturers. The report captures the mixed nature of the current economic landscape, which is both hopeful and cautious at the same time. The percentage of respondents who were positive about their own company’s outlook continued to edge higher, up from 76.1 percent in September to 78.1 percent in December. Yet, many subcomponents reflected some easing in activity expected over the next year. For example, respondents now anticipate sales growth of 3.0 percent in the next 12 months, down from 3.3 percent in September’s survey. Nonetheless, the report also found that manufacturing production should accelerate over the next two quarters, with the rising stock market and rebounding housing market helping to drive these estimates higher. The NAM/IndustryWeek survey also includes a number of special questions on the Affordable Care Act and the ongoing budget negotiations.

Other economic reports out this week include the latest numbers for job openings, producer prices, retail sales, small business confidence and wholesale trade.

Chad Moutray is the chief economist, National Association of Manufacturers.

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ISM: Manufacturers Report Strong Increases in New Orders, Production in November

The Institute for Supply Management (ISM) said that the purchasing managers’ index (PMI) continued to move higher, up from 56.4 in October to 57.3 in November. This was the fastest pace since April 2011, and it was above consensus estimates. Most importantly, it reflects the improvements that we have seen in the sector over the past few months, with PMI readings showing expanding levels of activity for six consecutive months.

New orders and production increases were both up strongly once again. The index for new orders rose from 60.6 to 63.6. This was the fourth straight month with the sales index exceeding 60.0, indicating an extremely healthy pace of new orders. This increase included higher export sales, with the exports index up from 57.0 to 59.5. Given the jump in new orders over the past few months, production has also risen sharply, up from 60.8 to 62.8 for the month, with the pace now at its highest point since February 2012. With manufactured goods exports only up marginally so far in 2013, the news of improved trade is a definite positive in this report.

On the employment front, net hiring appears to be picking up, even if these gains continue to be somewhat modest. The employment index increased from 53.2 to 56.5, a level not seen in 19 months.  We will get another reading of this on Friday, with the release of new jobs numbers.

The sample comments tend to reflect the more-upbeat nature of the underlying data. As one chemical products manufacturer put it, “Outlook for the remainder of the year and into 2014 is trending positive.” Others noted stronger sales, mirroring the increase in demand seen in the numbers above. Yet, these comments also noted some concern for the U.S. fiscal situation and its impact on the business climate. According to one machinery respondent, “Federal debt, deficit and inefficiency are causing a level of caution and uncertainty. Another individual spoke of how sequestration was impacting their business, as well.

Therefore, the ISM data continue to reflect the acceleration in manufacturing activity that we have seen since the beginning of the third quarter, with manufacturers mostly positive in their outlook as we move into 2014. To the extent that there is caution in the marketplace, it is often attributed to the actions of government. We saw that in the recent government shutdown, and with additional budget deadlines at the beginning of next year, there is some worry that policymakers might fail to reach a deal once more.

Nonetheless, the overriding theme in this report is the strong increases in manufacturing orders and production over the past few months. It will be important for policymakers to keep the momentum going by moving on from fiscal tensions and considering pro-growth measures that will allow the sector to flourish moving forward.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Monday Economic Report – November 4, 2013

Here is the summary of this week’s Monday Economic Report:

Manufacturers continue to report a pickup in activity, even as the pace of growth has varied in the different reports that have come out in the past week. On the more optimistic side, the Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI) edged slightly higher from 56.2 in September to 56.4 in October. New orders and production remain the strongest elements of the ISM analysis, with both measures indicating strong growth from August to October and an improvement from May’s contraction. Overall, respondents to the ISM survey were mostly upbeat in their outlook. Hiring, however, experienced some easing, with other measures echoing that finding. Automatic Data Processing (ADP) found that just 5,000 manufacturing workers were added in October.

Other data suggest that manufacturing growth has been spottier than the ISM report’s upbeat assessment. While overall industrial production rose 0.6 percent in September, the bulk of that gain stemmed from rebounding output for utilities. Manufacturing production increased a much more modest 0.1 percent, with durable goods activity rising 0.5 percent but nondurable goods output off 0.3 percent. September’s increase extended the progress from August, with year-over-year growth of 2.6 percent. Yet, weaknesses persist in the broader sector.

Meanwhile, sentiment surveys from Markit and the Dallas Federal Reserve Bank noted some easing in perceptions, most likely temporarily due to the government shutdown. Interestingly, the Dallas survey’s weakened outlook did not carry through to other activity measures. Manufacturers in the district reported increases in output, sales, shipments, utilization and capital spending. This was true despite the drop in optimism.

Consumer sentiment also continued to slide. The Conference Board reported that consumer confidence fell sharply from 80.2 in September to 71.2 in October. This mirrors similar data from the University of Michigan and Thomson Reuters released the previous week. The political stalemate in Washington was a large factor in the increased pessimism, dampening Americans’ outlook. Fortunately, with the government shutdown over (at least for now), confidence should pick up again moving forward. Even before the budget impasse, however, retail sales numbers were showing signs of decelerating. Retail spending declined 0.1 percent in September. The year-over-year rate has fallen from 6.0 percent in June to 3.2 percent in September. However, September’s decrease was mainly attributable to slower auto sales for the month, with more modest increases in the wider market.

The other big headline last week was the Federal Reserve Board’s decision to keep its current monetary policies in place. Unlike the previous month’s Federal Open Market Committee (FOMC) meeting, a decision was not anticipated this time around. The Federal Reserve is not expected to start tapering its asset purchases until its December meeting, or perhaps more likely at either the January or March meetings next year. Either way, short-term interest rates should stay near zero until the unemployment rate reaches 6.5 percent and/or longer-term inflation expectations exceed 2.5 percent. This should mean that the Federal Reserve will pursue “highly accommodative” policies for throughout all or most of 2014. Of course, minimal pricing pressures allow the Federal Reserve to continue such actions. Core consumer and producer prices have kept below the Federal Reserve’s stated target of 2 percent for much of the past year.

This week, we will get two key measures of health on the U.S. economy, both of which were delayed due to the government shutdown. On Thursday, we will get our first read of third-quarter real GDP. My prediction is for growth of 1.9 percent in the third quarter, which is near the consensus estimate. That would be below the 2.5 percent real GDP growth rate in the second quarter, but in line with the 1.8 percent growth rate experienced in the first half of the year. In short, we continue to experience modest economic growth. On Friday, we will get new jobs numbers from the Bureau of Labor Statistics. I do not expect the figures to be much different than last week’s ADP report, which found that 130,000 nonfarm payroll workers were added in October.

Other highlights this week include new data on consumer credit, consumer sentiment, factory orders, job postings and personal spending. In addition, the latest edition of the Global Manufacturing Economic Update will be released on Friday.

Chad Moutray is the chief economist, National Association of Manufacturers.

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ISM: October PMI Data Continues to Reflect Recent Pickup in Activity

The Institute for Supply Management (ISM) said that the purchasing managers’ index (PMI) moved slightly higher, up from 56.2 in September to 56.4 in October. This continues the pickup in activity seen in the manufacturing sector since May, when the PMI was contracting somewhat at 49.0. This means that manufacturers have observed expanding levels of activity for five consecutive months. October’s PMI reading was the fastest pace since April 2011.

The big story in this report was the strength of sales, with the index of new orders up from 60.5 to 60.6 for the month. This marks the third straight month with the sales index exceeding 60.0, indicating an extremely healthy pace of new orders. Moreover, while export growth eased somewhat in September, it accelerated again in October. The Export orders index has shifted from 55.2 to 52.0 to 57.0 over the past three months (August to October, respectively). This export sales figure was the highest level since April 2012.

There were some modest pullbacks in production (down from 62.6 to 60.8) and employment (down from 55.4 to 53.2). Output growth continues to be quite robust, even with the slight easing in October, as the index for production has exceeded 60.0 for three straight months, much as we see in the new orders data. On the employment front, however, it suggests that hiring growth continues to be quite modest at best, with manufacturers still hesitant to add too many workers.

Interestingly, the data do not indicate a large impact from the government shutdown, even as other surveys have suggested that it has zapped confidence. To the extent that there was any negative impact, it appears to be a small one. The sample comments that were provided tended to echo this. With that said, a fabricated metal products manufacturer hinted that the budget impasse had taken a bit of a toll on sentiment, with the shutdown and threat of a budget default “causing all kinds of concerns in our markets.” Moreover, a transportation equipment maker added a comment the negative impact of sequestration on their firm, saying, “Government spending continues to be slow in defense and military.”

Overall, manufacturers continue to be mostly upbeat in their outlook, with relatively strong growth in sales and output recorded for three straight months. “New business is booming,” said one respondent. This is obviously good news for the sector, particularly given the weaknesses that manufacturers have witnessed over the past year in production, exports, and hiring. Hopefully, this cautious optimism is warranted, with growth continuing to move in the right direction.

It is notable that economic growth remains below its potential, with growth in the second half of 2013 of less than two percent. At the same time, ongoing budget negotiations and other government uncertainties put some downward risks to growth as we move into 2014. More than anything, policymakers need to consider pro-growth measures that will keep the manufacturing sector flourishing and build on the current momentum seen in this ISM report.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Monday Economic Report – October 7, 2013

Here is the summary for this week’s Monday Economic Report:

Policymakers’ ability to solve the country’s fiscal problems has once again come into focus with the government shutdown and the looming debt ceiling deadline. Manufacturers are eager for our leaders to solve these short-term differences and move on to address the nation’s long-term challenges. In the most recent NAM/IndustryWeek Survey of Manufacturers, nearly 85 percent of respondents said that they want the President and Congress to come to a long-term budget deal that effectively tackles the deficit and debt. In addition, three-fourths expressed the need to slow the growth of entitlement spending. Once these structural issues are solved, the country can begin to adopt pro-growth measures like those laid out in the NAM’s Growth Agenda that will allow the manufacturing sector and other businesses to expand and flourish. Instead, we are stuck in a budgetary impasse that creates more uncertainty and harbors increased frustrations with the political process.

With the government closed, statistical agencies will not be able to release new data. Last week, that meant that we did not get the latest jobs numbers as well as updates on construction spending and factory orders. There was some consternation about this, including stories in the USA Today and The Hill. Assuming the shutdown lasts through this week, we will not receive new data for international trade, job postings, producer prices, retail sales and wholesale trade. Private sources will only partially fill the vacuum left by the absence of government data. For instance, last week, Automatic Data Processing (ADP) announced its job estimates, with the Institute for Supply Management (ISM) releasing its closely watched Purchasing Managers’ Index (PMI) data. This week, the Federal Reserve will provide consumer credit data, and the Manufacturers Alliance for Productivity and Innovation (MAPI) will release its latest survey.

In terms of the numbers that were out last week, they tended to confirm the trends across the past few weeks. The ISM data show a clear uptick in manufacturing activity during the third quarter, with an average PMI of 55.8 in July, August and September. That is a significant improvement from a sector that essentially stalled during the second quarter, with the sharp acceleration in sales being a major factor. The third-quarter average for the new orders index was a surprisingly strong 60.7, up from 51.0 in the second quarter. Many regional surveys backed up this analysis, with rebounds in the latest reports from ISM-Chicago and the Chicago and Dallas Federal Reserve Banks.

One area that continues to lag behind is hiring. In many sentiment surveys, employment growth has been up only modestly. For the most part, manufacturers were positive about sales and output over the next 6 to 12 months, with some pickup predicted in hiring. The NAM/IndustryWeek survey predicted 1.1 percent growth on average in hiring in the manufacturing sector over the next year; yet, roughly 60 percent of respondents did not plan to change their employment levels at all. With that as context, it was perhaps not surprising that the ADP employment report continued to reflect disappointing jobs growth for manufacturing, up by just 1,000 in September and down by 12,000 year to date. Nonfarm payrolls also grew by a less-than-stellar 166,000 workers, suggesting a persistent hesitance to bring on new workers in the economy extending beyond the manufacturing sector.

Chad Moutray is the chief economist, National Association of Manufacturers.

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ISM: Manufacturing Activity Continued to Accelerate in September

The Institute for Supply Management’s (ISM) purchasing managers’ index (PMI) edged slightly higher, up from 55.7 in August to 56.2 in September. This was the fourth consecutive increase, illustrating improvements in the sector since the contraction observed in May. Moreover, September’s PMI was the fastest pace since April 2011.

The larger story is the progress acceleration in activity over the course of the past few months, with relatively strong growth in production and new orders. For instance, the index from production has bounced back from contracting in May (with a sub-50 reading of 48.6) to recording three months in a row of 60-plus readings. The production index increased from 62.4 in August to 62.6 in September. The sample comments tended to echo these sentiments, with many citing increasing demand for their goods.

Along those lines, the pace of new orders remained healthy despite a slight pullback from 63.2 to 60.5. Stronger sales activity should bode well for future output growth. One area of caution was in foreign markets. The exports index eased from 55.5 to 52.0, suggesting a moderation in the growth of sales overseas.

One of the weaker components of the PMI data has been hiring growth, with manufacturers continuing to be hesitant to add new workers. The employment index rose from 53.3 to 55.4, suggesting a pickup in hiring for the sector. This would be good news if true, particularly with manufacturers adding just 20,000 additional workers over the past year and several other reports, including the NAM/IndustryWeek Survey of Manufacturers, indicating only modest growth at best in terms of hiring.

Two other data points of note included inventories and prices. Stockpiles in general have been depleted over much of the past year or so, with negative inventories in five of the nine months so far in 2013. In September, inventory levels were unchanged, up from contractions in July and August. Meanwhile, pricing pressures have picked up a bit (up from 54.0 to 56.5), and yet, inflation remains mostly modest.

Overall, manufacturers wrapped up a pretty decent third quarter in terms of output and sales. That is definitely the case when compared to the softness experienced in the second quarter, when activity was essentially stalled. The average PMI reading for the last three months was 55.8, and more importantly, the average new orders reading was 60.7, indicating relatively strong growth in sales. As such, this data tends to mirror other reports that show an acceleration of activity of late for the sector.

Such data tend to support the notion of cautious optimism ahead, and yet, uncertainties in the marketplace could put a monkey wrench in such positivity. Fiscal uncertainty is likely to limit economic growth – at least in the short-term – and we continue to see growth rates for manufacturing that, while better than in the spring, are still not as robust as we might like. With that in mind, this manufacturing report suggests movement in the right direction, but policymakers would be wise to move beyond the short-term budget battles and begin debating ways to grow our economy for the long-term.

Chad Moutray is the chief economist, National Association of Manufacturers.

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