Manufacturing grew at a faster rate in January and February at the fastest pace since May of 2004. In fact there has been growth for 18 consecutive months in the manufacturing sector.
According to Norbert Ore, chair of the Institute of Supply Management’s Manufacturing (ISM) Business Survey Committee, this pace gives “some credibility to a strong first half of the year and for certain a strong first quarter.”
New orders and production are being driven by the strength in exports which results in continuing replenishment of supply chain inventories. All the important components such as orders, production, employment and exports are improving from previous months. The passage of the tax code legislation last December helped build confidence. Government incentives from the tax bill – accelerating tax depreciation for equipment purchases – are also expected to positively impact manufacturing sales & production in 2011. According to Ore, this is a typical business cycle recovery. Obviously manufacturing is leading the economic recovery but is this pace sustainable? Probably not.
Pricing pressures are expected to become more & more of a problem in the near future. ISM’s price index rose in February, up from January and the highest reading since July 2008. Sadly last month was also the 20th consecutive month of rising prices. Ore views the jump in prices as the only “big negative” for U.S. factories in February. In a press conference, Ore stated that increases in commodities such as oil & steel are hurting profits which might lead some companies to pass the costs on to customers. And of course international events continue to raise concerns over inflation.
What kind of year was 2010 for your company? And what concerns do you have going forward into 2011? We look forward to reading your comments – and thanks for stopping by EVERYTHING’S CONNECTED
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