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Will US Manufacturing Rebound Continue?

Economic activity in the manufacturing sector rose in June, according to the Institute for Supply Management.

Design engineers looking for signs of a rebound in American manufacturing have some good news to point to. The Institute for Supply Management reported that its key index of economic activity in the manufacturing sector rose to 55.3 in June, up 1.3 points from May.

This marked the 23rd consecutive month the Institute's Purchasing Managers' Index (PMI) showed growth. The Institute's measures of new orders and of production also both rose slightly in June, to 51.6 and 54.5, respectively, from 51.0 and 54.0 in May. Its employment index was up a full 1.8 points, from 58.2 to 59.9.

Those rosy figures are encouraging, all the more so amid widespread worries that, as Congress bickers about raising the debt ceiling, we may be staring into the maw of a double-dip recession. That concern, leavened by optimism, appears to be reflected in comments the Institute posted from respondents to the survey used to generate its numbers.

"Customers are still being cautious with their buying. Certain plastics and metal prices continue to rise," said a respondent in the machinery sector.

"Slight slowdown in overall business in both domestic and international markets, although still above 2010 at the same time," said a respondent in the Institute's electrical equipment, appliances, and components sector.

If in-the-trenches managers responding to the survey were generally cautious, some top executives are bullish. Perhaps they have reason to be. In an interview at the recent Siemens Automation Summit, Raj Batra, president of the Industry Automation Division for Siemens Industry Inc., pointed to the large cash pool held by many companies and the imperative to remain competitive as drivers of growth. "When you look at manufacturing, from everything we see, it's leading the recovery," he says. "The second thing we have going for us is that US infrastructure is old and aging. Manufacturing is becoming much more strategic to the enterprise. People want to upgrade their plants."

While the domestic outlook is promising, unfortunately global prospects are more tempered. In a separate survey released July 1, the JPMorgan Global Manufacturing PMI fell to 52.3 in June, down from 53.0 in May. JPMorgan reported that rates of expansion slowed in Europe, Japan, China, and the United Kingdom.

In interpreting the data, it's important to note that while JPMorgan says the rate of expansion has hit a 23-month low, manufacturing production output actually increased in June. Employment also rose in June, for the 19th month in a row, JPMorgan says.

On the positive side, the JPMorgan press release closes with a measured but positive quote from David Hensley, the bank's director of global economics coordination. "There are tentative signs that the PMI is nearing a bottom, consistent with the recent firming in some of the official data on manufacturing output," he says. "We continue to anticipate gradual improvement in global industry this summer."

For stateside engineers, there's been no better news recently than Siemens's report that it's looking to hire 809 engineers across the United States.

All in all, everything I've written above can be taken as either glass half-empty or half-full. After the economic travails of the past three years, I prefer the latter. I’m hoping that I can write more posts about the (re)rise of American manufacturing.

What's your sense? Leave a comment below about your experiences, or email me directly at [email protected].

TAGS: Automation
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