Domestic manufacturing up; overseas more challenging

Recently released statistics indicate that U.S. manufacturing is growing at the fastest pace in more than three years – definitely news this sector enjoys hearing. Economic activity in the manufacturing sector expanded in August for the 15th consecutive month, and the overall economy grew for the 63rd consecutive month.

Even without the most recent news, anyone involved in manufacturing knows how busy they and their companies are. But, numbers always help reinforce exactly how well the economy is doing.

The Institute for Supply Management’s (ISM) manufacturing index, according to the Report On Business, rose to 59% for August, from 57.1% in July, the highest it has been since March 2011, when the index registered 59.1%. The New Orders Index registered 66.7% while the Production Index registered 64.5%, both showing an increase of 3.3 percentage points from July, as well as indicating growth in new orders for the 15th consecutive month. Inventories of raw materials registered 52%, an increase of 3.5% from the previous month. This is the highest recorded New Orders Index since April 2004, when it registered 67.1%.

Of the 18 manufacturing sectors covered in the ISM’s PMI, 17 reported growth for August.

Now, it’s well known that exports are big business for U.S. manufacturing. A recent report from the U.S. Department of Commerce shows that U.S. exports supported 7.1 million jobs with overall goods-and-services exports totaling $2.3 trillion and supporting more than 11.3 million American jobs in 2013. Manufactured exports, a subset of goods exports, account for almost 88% of jobs supported by goods exports.

I wish I could leave this column with just the positive news about U.S. manufacturing, but I have serious concerns with events overseas and their potential impact on our exports.

Turmoil in the Middle East and Ukraine, which cover the nightly news, are costing the U.S. millions of dollars each day with little resolution in sight. Add to this recent reports that growth in China is slowing and respondents to the ISM stating that international turmoil is weighing on businesses. Then, remember the statement from Li Bin, head of China’s National Health and Family Planning Commission that China wants to “strongly advocate health ministry organizations to use domestically made medical devices, especially pushing top-level Class III hospitals to use domestically made products.” And there’s my concern.

It will be nearly impossible to remain a dominating player – the U.S., Europe, and Japan currently dominate nearly three-quarters of China’s medical device market – when China’s government is looking to create incentives for locally owned and made medical products.

U.S. companies with operations on Chinese soil may soon have no local market in which to sell the products, so they may look to export from China back to the U.S., which in turn would cause a decline of U.S. manufacturing growth. Let’s hope we don’t lose ground with what’s Made in the U.S.A. and what’s helped turn this economy around.

– Elizabeth