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MAPI QuickPoint - A glance at a building block of worldwide business data  MAPI QuickPoint

Analysis on ISM Report: ‘Very Positive’ Start to 2010

The following is an analysis from Daniel J. Meckstroth, Ph.D., Chief Economist for the Manufacturers Alliance/MAPI, regarding the Institute for Supply Management (ISM) report for January 2010:      

 “A first look at manufacturing activity in January by the Institute for Supply Management (ISM) is very encouraging,” said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI.  “The ISM index at 58.4 in January was up from 54.9 in December (an index above 50 indicates growing activity).  All the component indicators were moving in a positive direction in January, including the index for production which was exceptionally strong.  There is a major inventory swing underway in the manufacturing sector that explains why industrial activity is so strong.  

“Firms were previously in a panic mode and drastically slashed their inventories by reducing production, but now they find themselves low on materials and components,” he added.  “Once orders started rising again there is an acceleration in production to catch up with underlying demand.  U.S. manufacturing physical production was up 4.5 percent in December from its trough in June 2009.  Furthermore, a global recovery in world industrial activity has helped U.S. exports and supplemented domestic demand.   The overall tenor of the ISM report is very positive and a good way to start 2010.”

 

 
  		   

Issues in Brief  Issues in Brief
E-551.pdfTen More Talking Point About U.S. Manufacturing
Since manufacturing is still struggling to regain solid footing after the historic downturn of 2008 and 2009, we have assembled some relevant, data-based talking points to assist manufacturing executives in giving a targeted overview of the current state of the sector.

E-550.pdfTaking Stock of the Manufacturing Recovery in Selected Regions of the World
Manufacturing is rebounding in Europe, Asia, and the U.S. along a surprisingly synchronized path. The mature emerging economies of Asia and Europe took off earlier than their developed regional counterparts. Still, in most countries manufacturing is trailing the rest of the economy in terms of vitality. This briefing explores some reasons behind regional differences and similarities of the cyclical upturn.
E-549.pdfOvercapacity Problems:  Efforts Not Yet Effective
China’s economy continued to grow robustly in 2009 amidst the global recession, thanks to the government’s swift and aggressive policy responses. The contribution of investment to GDP growth more than doubled during this period. Although it helped China to avoid a severe recession, and alleviates pressures on the job market, the negative impacts on the economy from overreliance on investment started to show at the end of 2009. This article focuses mainly on the issue of overcapacity exacerbation and analyzes why the central government’s efforts to curb overinvestment and overproduction have not been very successful.
1 - 3 Next

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Durable-Goods Orders Rose Modestly in December
“The sector is regaining its footing again,” said Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI. “An inventory swing is pushing up orders for materials and the resulting increase in production activity is having a positive impact on business equipment spending.” The durable-goods data was consistent with a moderate-paced recovery, Mr. Meckstroth said, though the level of production will probably taper off in future quarters. The overall increase was helped by a 3.6 percent rise in orders for cars and car parts. But aircraft orders dropped by 38.2 percent in December, after a 40 percent drop in November.
"A Kind of Uneasy Détente"
Now what has emerged is “a kind of uneasy détente,” according to Waldman, in which a near financial crash has been “neutralized by everything the Fed had at its power.” The question on everyone’s mind – consumers, economists, securities traders, politicians, etc. - is when and how those programs can be dismantled without pushing the economy back into a crisis. “The Fed’s liquidity programs are the only thing between us and another recession right now. It’s really been the Fed’s monetary policy that prevented a disaster, it really did,” said Waldman. “The worst mistake that Bernanke can make right now is to start pulling the stimulus too fast. If the Fed acquiesces (to political pressure) too fast and raises interest rates and pulls in stimulus too early, that’s the biggest risk of a double-dip recession.”
Manufacturing surge fuels recovery hopes
"These issues suggest that while 2010 will be a recovery year for the US factory sector, it will likely be muted and insufficient to soak up historic excess capacity," said Cliff Waldman, an economist for the Manufacturers Alliance/MAPI. However, global stock market gains eclipsed the downbeat construction data, displaying a buoyant performance.
Dollar's decline a boon for U.S. manufacturers
The lingering weakness "helps the poor, beleaguered exporter whose goods are becoming more competitively priced in the global market," said Cliff Waldman, an economist at the Manufacturers Alliance/MAPI. The greenback's slide is part of the reason that U.S. exports were 12 percent higher in October than in April, and is a factor in the nation's industrial output having risen steadily for five straight months. In a recent nationwide survey of major manufacturers that buy tools and parts from smaller suppliers, 47 percent said they were doing more business in the United States as a direct result of the dollar's decline, according to Mfg.com, a Web site that links suppliers and manufacturers.