PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

FACT OF THE WEEK: Manufacturing Up in November

By at 2 December, 2016, 4:28 pm

PhotoIndustryGears

The Institute for Supply Management’s read on manufacturing for November pointed to the manufacturing sector expanding its output in November.

As reported by the ISM: “Manufacturing expanded in November as the PMI registered 53.2 percent, an increase of 1.3 percentage points from the October reading of 51.9 percent, indicating growth in manufacturing for the third consecutive month. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.”

The ISM report highlighted which sectors were expanding and which were not: “Of the 18 manufacturing industries, 11 are reporting growth in November in the following order: Miscellaneous Manufacturing; Petroleum & Coal Products; Paper Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Chemical Products; Fabricated Metal Products; Plastics & Rubber Products; Machinery; Nonmetallic Mineral Products; and Primary Metals. The six industries reporting contraction in November — listed in order — are: Printing & Related Support Activities; Wood Products; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Transportation Equipment; and Furniture & Related Products.”

A third month of expansion in manufacturing is welcome news, as industrial production, including manufacturing, has been struggling for the past nine years. That includes the industrial sector effectively being in another recession since late 2014. The latest data on industrial production from the Federal Reserve showed that manufacturing output rose by a mere 0.2 percent in October, after an increase of 0.2 percent in September, and a decline of 0.5 percent in August. Over the previous year, manufacturing output fell by 0.2 percent. And the October level (103.97) effectively stood at the same output level as in November 2014 (103.95), and below the high (108.49) set in December 2007.

Small Businesses in the Manufacturing Sector

For good measure, this very much is a small business story. As noted in this SBE Council analysis, the number of small manufacturing employer firms with less than 20 workers make up 75 percent of all manufacturers, and unfortunately, the number of small manufacturers from 2007 to 2014 (latest Census Bureau data) fell by 12 percent.

The Problem? The industrial sector has been hit hard by wrongheaded policymaking over the past eight-plus years, including higher taxes, increased regulation, a lack of U.S. leadership in terms of freer trade, and uncertainties regarding monetary policy. Reversing course on such policymaking – namely, implementing an agenda of tax reform and relief, regulatory reform and relief, reduced barriers to international trade, and choosing Fed governors who focus on sound money – would establish a sound foundation upon which U.S. manufacturing growth can resume robust growth.

It appears that both in the agenda spelled out on his campaign website during the campaign as well as what his transition team is focusing on now before president-elect Trump assumes office, that many of these issues will be a priority from Day One of his Administration. Many of these changes can’t come quick enough for manufacturers and businesses, particularly small businesses, to more competitively operate and grow their firms moving forward.

Raymond J. Keating, Chief Economist

 

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