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Tags: factory | manufacturing | economy | November

Factory Activity Expanded More Than Economists Projected in November

Monday, 01 December 2014 10:13 AM EST

Manufacturing in the U.S. expanded in November at a faster pace than projected, signaling the world’s largest economy is rising above a global slowdown.

The Institute for Supply Management’s factory index was little changed at 58.7 last month, the second-strongest level since April 2011, compared with 59 in October, the Tempe, Arizona-based group’s reported Monday. It exceeded the median forecast of 80 economists surveyed by Bloomberg and readings greater than 50 indicate growth.

Orders over the past four months have been the strongest in a decade as growing demand from American consumers makes up for any letdown among foreign customers. Continued progress in the labor market and the plunge in gasoline prices may give Americans an even greater ability to spend in coming months, supporting manufacturing as the year draws to a close.

“Manufacturing is likely to remain a contributor to the overall pace of expansion,” Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. “The consumer is in good shape and getting better. We still have some positive trends ahead of us in terms of demand.”

The median estimate in a Bloomberg survey of economists called for a decline to 58. Projections ranged from 54.5 to 61. Manufacturing accounts for about 12 percent of the economy.

American producers keep powering ahead at the same time their global competitors slow. Factories in Germany, France and Italy unexpectedly shrank last month, according to purchasing managers’ gauges. An index of Chinese manufacturing fell as mandatory plant shutdowns during the Asia-Pacific Economic Cooperation forum aggravated a pullback in the economy.

U.K. Manufacturing

One standout internationally was the U.K., where manufacturing growth unexpectedly accelerated in November to the fastest pace in four months as domestic demand strengthened.

The U.S. ISM’s orders index climbed to 66 from 65.8 in October. The 64.6 average over the past four months is the highest for a similar period since early 2004.

Even exports showed improvement, with the gauge advancing to 55 from 51.5 in October.

Factories are struggling to keep up with demand as the index of bookings waiting to be filled rose to 55, the highest since April, from 53.

Some of the increase in backlogs may be due to inclement weather last month that could have prevented companies from obtaining needed parts. ISM’s supplier deliveries gauge increased to the highest level since February, indicating factories were experiencing more delays in getting materials.

Strong Production

The group’s production gauge barely budged from a 10-year high, decreasing to 64.4 in November from 64.8 the month before.

The measure of factory employment decreased to 54.9 from 55.5 in October.

Lower raw-material costs are another boon for manufacturing. ISM’s prices paid index fell to 44.5, signaling expenses dropped for the first time since July 2013 and by the most since July 2012.

One potentially dark cloud in the report was that factories’ clients reported they had about enough goods on hand, suggesting bookings may not pick up much more. The customer inventory index rose to 50, the break-even point between having too much and too little stock. That was its highest reading in three years.

Rockwell Automation Inc., the Milwaukee-based maker of software for factories, is among companies that are optimistic about prospects for U.S. manufacturing growth in 2015, even if it does moderate from this year’s pace.

U.S. ‘Healthiest’

“Our sales tend to move best with the actual industrial production growth rates and probably secondarily with what’s going on with general GDP growth,” Chief Financial Officer Theodore Crandall said at a Nov. 20 investor meeting. On a global scale, “what we’re expecting in terms of the healthiest environment in 2015 is the U.S.”

Gross domestic product grew at a 3.9 percent annualized pace in the third quarter following a 4.6 rate in the prior period, marking the strongest six months of growth in more than a decade, according to figures from the Commerce Department.

Consumer spending, which accounts for about 70 percent of the economy, grew at a 2.2 percent annualized rate in the third quarter up from a previously estimated 1.8 percent. The improvement was spread across durable and non-durable goods, including recreational vehicles and restaurant meals.

Business investment in new equipment climbed at a 10.7 percent annualized rate last quarter, revised up from 7.2 percent, last week’s report showed.

© Copyright 2023 Bloomberg News. All rights reserved.

Manufacturing in the U.S. expanded in November at a faster pace than projected, signaling the world's largest economy is rising above a global slowdown.
factory, manufacturing, economy, November
Monday, 01 December 2014 10:13 AM
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