U.S. manufacturing making a comeback
January, 2012 data on national factory activity
Troy Media – ATB Financial
After more than a half year of pessimistic outlooks for the world’s economy, it’s time to remind ourselves that all is not bad with the state of the world. Impending doom and gloom in Europe has monopolized the headlines lately, but news on American manufacturing has been surprisingly good of late.
The Institute for Supply Management (ISM) released its January, 2012 data on national factory activity yesterday, showing that it expanded for the 30th consecutive month. There was a sharp contraction in activity during the recession; this was followed by a jolt in activity, thanks to stimulus spending and a catching-up period due to the recession. That manufacturing growth is continuing to climb, with most of these effects having now run their course, is actually pretty positive news.
It’s not coincidental that the American manufacturing sector is beginning its renaissance at about the same time that the Federal Reserve began its push to keep long-term interest rates low. An important determinant of any currency’s value is the difference in interest rates that investors can receive after adjusting for inflation, so it’s not surprising that the moves by the Fed have helped push down the value of the U.S. dollar.
America doesn’t really make many apparel goods (i.e. clothing) or low-end consumer products, but it continues to manufacture very large capital goods and transportation equipment. The low dollar is making it an opportune time for developing countries to purchase everything from planes to backhoes.
The United States isn’t out of the woods yet, by any stretch of the imagination, but there are certainly aspects of the economy that can inspire optimism.
Category: Business
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