I only wish manufacturing made up more of the economy
Manufacturing continues to contribute more than its share to the economic recovery, according to index numbers released this morning (March 1) in the Institute for Supply Management survey of purchasing managers.
Unfortunately, manufacturing accounts for only about 12% of U.S. economic activity.
U.S. manufacturing expanded in February for a seventh consecutive month.
The Institute for Supply Management’s index did drop to 56.5 from January’s 58.4. But that was a drop from a very high level. January’s reading was the highest since August 2004. In the survey anything above 50 indicates an expansion.
Below the top number the survey was spotty.
Production and new orders slowed in February with the production index falling to 58.4 from 66.2 and the new orders index dropping to 59.5 from 65.9. Inventories still came in below the 50.0 threshold between expansion and contraction but at 47.3 they did inch closer to a positive reading. That was up from 46.5 in January. The survey’s employment index climbed to 56.1. That’s the highest level since January 2005.
A similar manufacturing index in China moved in much the same way: still up but at a slower place.
The manufacturing sector index for China, reported by HSBC Holdings and Market Economics, came in at 55.8 for February. The index stood at 57.4 in January. (Again anything above 50 signals an expansion.)
All these indexes need to be taken with a grain of salt (or three.) They’re conducted simply by asking purchasing managers whether business is better or worse and what they’re planning for the future. One possible danger in these numbers is that they may simply be reflecting rebuilding of inventories from a very low state at the end of 2009. Inventory rebuilding contributed 3.88 percentage points to the fourth-quarter 5.9% U.S. economic growth rate in the United States.
I remain positive but cautious on the U.S. manufacturing sector. I’m adding Fluor (FLR) to Jim’s Watch List with this post. The stock pulled back on weak guidance for 2010 last week and it’s attractively priced in a recovery that includes investment in factories, power plants, and infrastructure.
Now all we need, of course, is that recovery.
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Thanks Jim,
…will keep tabs on FLR.
If I may drop a symbol for your consideration… An industrial that I held ‘through the valley of darkness’ and for whom business is now picking up is AOS. …perhaps they are a bit farther along in terms of recovery, but it may not be too late for AOS considering the cycle in domestic housing.
w/ best regards,
Frank in Mpls.
We should start seeing guidance coming out of the first quarter earnings season starting soon, and as Jim said, “if we don’t start seeing company’s talking about top line revenue growth we could be in for as much as a 15% correction”
Let’s not get ahead of ourselves…..
correction: a *manufacturer*
they have a large electrical division and also make water heaters, disposers, etc.
Good point DJ, but then again, I’ve already been through the valley of darkness!
Jim- pass that salt please, I’ll take all this hopeful [wishful?] thinking about the resurgence of the economy with the three grains. Just noted this on the other channel this morning-
…bank lending in the US has contracted this year at the fastest rate in recorded history.
The article went on to note that there are always two sides- that demand for loans is way off, too.
I’m one of those hide-bound side-lines sitters, not a player [even with Jubak's skillfull guidance] so I will continue to do just that and let the good times roulez right on by me, for now. There will be many fine opportunities coming along, soon- with luck, in manufacturing [as opposed to consumer spending.]
Thanks as always Jim
There is a saying: manufacturing is the locomotive of our economy. Although there will always be some manufacturing in the US, for the foreseeable future, manufacturing will come after services sector. There are many reasons for that and we all know what those reasons are. Unless the price of oil goes through the roof and pushes the transportation costs of raw and manufactured goods in and out of China, manufacturing is yesterday’s story in America. And it looks like it will get worse before it gets better. With this backdrop, hoping to see an increase in manufacturing is like trying to swim upstream.
Enough macro mumbo jumbo… Why don’t we think of swimming downstream? No matter what happens to the economy, there will be millions of old and sick people in this country. They will need medical supplies (syringes, prostheses), drugs (TEVA?), hospitals (health REITs?), technology and management. I think this site is noticably weak in investment in health care sector.
Another thing that intrigues me is the big wig investors interest in garbage companies. What is the down stream here? Are we running out of ladfills? Will the aging population create more garbage? Can someone explain please?
Of interest on the recovery
http://www.businesscycle.com/news/press/1741/