PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Manufacturing Off to an Encouraging Start in 2021: Goods News for Small Business

By at 2 February, 2021, 2:21 pm

 

by Raymond J. Keating-

The early takes on manufacturing in 2021 point to a very encouraging start to the year.

The IHS Markit U.S. Manufacturing PMI registered a record high in January 2021 (this index goes back to May 2007), thanks to an acceleration in both output and new orders. That included the most rapid increase in new export orders since September 2014. The numbers also capture an increase in business confidence and an easing of COVID-19 restrictions.

At the same time, supply chain disruptions and delays, including raw material shortages and transportation challenges, increased markedly, with costs rising as a result. Some of those input costs have been passed on to customers via increased prices.

Similarly, the ISM’s Manufacturing PMI for January pointed to continued manufacturing growth, including strong growth in new orders, supported by export orders. The ISM measure also reported supply chain or production challenges.

Chris Williamson, the chief business economist at IHS Markit, summed up the outlook this way:

“Demand from both domestic and export customers picked up sharply in January, buoyed by several driving forces. Consumer demand has improved while businesses are investing in more equipment and restocking warehouses, preparing for better times ahead as vaccine roll outs allow life to increasingly return to normal over the course of 2021.”

That’s encouraging.

One final reminder for when we focus on manufacturing: This is overwhelmingly about small and medium-sized enterprises. Based on the latest Census data – i.e., from 2017 and long before the pandemic hit – consider that 93.4 percent of employer manufacturers have fewer than 100 employees.

When manufacturing suffers, small business suffers. And when manufacturing expands, that’s good news about and for small business.

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

 

 

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