According to numbers from the most recent Philadelphia Federal Reserve's survey index for manufacturing, the industry is slowing. A number of indexes qualify the manufacturing industry on a regular basis, and not all agree with the less-than-optimistic numbers from this Fed survey. Some surveys indicate that overall outlooks from business owners in the niche are slowly growing in a positive direction.
The Philadelphia Fed survey numbers were published in November and were much lower than experts expected. October's index was 19.8, and a MarketWatch survey of economists predicted a slight slowdown, to 14.5, in the November index. Instead, the Fed survey chimed in with a November index of 6.5, a loss of over 13 points in a single month. A strategist at TD Securities opines that the significant drop in the Philly Fed index could be related to fallout from the government shutdown earlier in the fall. The strategist pointed to the uncertain future for the manufacturing industry as a reason production could be stagnant.
The Fed survey isn't the only authority on the outlook in manufacturing. In fact, CIBC World Markets spokesperson Andrew Grantham states that markets usually pay more attention to numbers published by the Institute for Supply Management, which come out shortly after the Fed numbers. According to the ISM survey, manufacturing saw growth in November that outpaced monthly activity for the past 2.5 years. The ISM index was at 56.4 in October and rose to 57.3 in November. A third manufacturing index—the Markit US index—also rose month-over-month in November. The October Markit index was 51.8 in October, and it rose to an eight-month high of 54.3 in November.
These conflicting surveys and indices from specialist organizations make it apparent that worries about uncertainty in the field are well founded. Despite the back and forth, many manufacturing pros are positive about the future for the first time in several years. A NAM/IndustryWeek survey indicates 78.1 percent of professionals in manufacturing are positive about the outlook for their company. That number is up from September by a few points and represents the continuation of a slow rise throughout 2013 following fears about the fiscal cliff, but outlooks haven't quite recovered to early 2012 levels, when the survey reported an 89 percent positive response. Manufacturing companies report concerns about the rising cost of health insurance, economic uncertainty, and unfavorable business climates, all of which are keeping outlooks from reaching peak levels.
The Fed survey is a single indicator of manufacturing levels. Other surveys published contradicting data, but the consensus among professionals seems to be that cautious optimism is a good stance to take. Companies are being careful with investments and growth, though, as they wait to see what the economy will do.
(Photo courtesy of freedigitalphotos.net)
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