Manufacturing Continued to Climb Back in October

By at 2 November, 2020, 2:02 pm

by Raymond J. Keating-

Two measures of manufacturing activity served up some good news for October.

First, the Institute for Supply Management reported that the manufacturing sector grew in October, indicating that the economy had expanded for the sixth straight month. Also, with the October ISM Manufacturing PMI coming in at 59.3 percent, it matched the highest level since September 2018.

Timothy R. Fiore, who is the chairman of the ISM’s Manufacturing Business Survey Committee, was quoted, “Manufacturing performed well for the third straight month, with demand, consumption and inputs registering growth indicative of a normal expansion cycle. While certain industry sectors are experiencing difficulties that will continue in the near term, the overall manufacturing community continues to exceed expectations.”

The ISM report also pointed out that 15 of 18 manufacturing sectors reported growth in October.

Second, the IHS Markit U.S. Manufacturing PMI also pointed to improvement in manufacturing in October. It was reported:

“The rise in the PMI stemmed largely from rates of output and new order growth accelerating during the month, despite export orders contracting. Meanwhile, signs of reduced pressure on capacity led to a slower rise in employment, with business confidence also historically subdued though picking up compared to September.”

Specifically, it’s worth highlighting the following point: “Contributing to the rise in the headline figure was a quicker upturn in production in October. The rate of output growth accelerated to the sharpest since November 2019. Companies often stated that greater output was driven by stronger client demand and higher new order inflows.”

Chris Williamson, chief business economist at IHS Markit, ably summed up the situation in terms of the potential positives regarding investment, along with the ongoing pandemic-related risks:

“Producers of investment goods such as business equipment and machinery are leading the upturn in a welcome sign of rising business confidence and corporate investment, but
it was worrying to see consumer goods producers report weakened order book growth, reflecting rising virus-related worries. Going forward, much will naturally depend on the extent to which the economy can remain open and functioning in the face of rising virus case numbers.”

Indeed, that is our economy’s situation in a nutshell. Namely, we need business investment, along with entrepreneurship, to drive the economy forward – free from pandemic uncertainties. And that is why we are all looking forward to effective vaccines and therapeutics, as those developments will mean saving lives and the economy.

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


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