PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Manufacturing Data is Encouraging: Progress on Key Policies Will Provide Further Boost

By at 20 July, 2017, 3:58 pm

by Raymond J. Keating-

The most recent data on manufacturing generally is encouraging, though with some question marks persisting.

The Institute for Supply Management’s manufacturing index hit 57.8 percent in June. That was up by 2.9 percentage points from May, and the highest level hit since August 2014. Timothy R. Fiore, chair of the Institute for Supply Management Manufacturing Business Survey Committee, noted, “Comments from the panel generally reflect expanding business conditions; with new orders, production, employment, backlog and exports all growing in June compared to May and with supplier deliveries and inventories struggling to keep up with the production pace.”

Meanwhile, according to the Federal Reserve’s industrial production data, manufacturing output was up by 0.2 percent in June. The last few months have been up and down in terms of manufacturing production. After six straight months of growth, output fell by 0.8 percent in March, grew by 1.0 percent in April, declined by 0.4 percent in May, and then grew by June’s 0.2 percent. It’s worth noting that a manufacturing recession that started in late 2014 came to an end basically in September of 2016. Still, over the longer haul, manufacturing output has not recovered to its pre-recession high, which was registered in December 2007. In fact, the manufacturing output index of 104.13 in June 2017 remained well short of the December 2007 level of 108.5. So, we’ve experienced no growth in manufacturing for a decade.

Looking ahead, manufacturing needs a shift in policymaking in a pro-growth direction. Those policies need to clear governmental obstacles to entrepreneurship, investment and innovation, namely, implementing broad-based tax relief and reform, and regulatory relief and reform.

It also must be kept in mind that manufacturing in the U.S. truly is highly entrepreneurial, and overwhelmingly populated by small businesses. For example, 75 percent of manufacturing employer firms have less than 20 employees, and 94 percent less than 100 workers.

Get the policy mix right, and U.S. manufacturing entrepreneurship and growth will step up in terms of robustness and sustainability.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.

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