Thursday, September 20, 2018

Top Factors Driving Manufacturing Sector Growth

The Institute for Supply Management (ISM) produces a monthly Manufacturing Index that reviews growth or contraction within the manufacturing sector. The report is based on surveys of hundreds of manufacturing firms about recent employment and production trends, inventories, new orders, and supplier deliveries.

The Manufacturing Index is calculated on a scale of 0 to 100. A score of 50 or more points suggests that manufacturing is expanding, while a score below 50 points indicates contraction.

After declining to just 32.4 points in December 2009, the Manufacturing Index has risen significantly over the past decade, reflecting increased confidence throughout the manufacturing sector. In May, the index registered 60.2 points, an increase of 1.5 percentage points from the previous month and the twenty-second consecutive month of manufacturing expansion.

Such growth is likely to continue in the coming years. Indeed, 2017 marked the first year in which more manufacturing jobs were created in the US than offshored, a potent reminder that manufacturing has largely recovered from the dark days of the Great Recession.

Which Regions Are Seeing the Most Manufacturing Growth?

Forbes recently published its own regional analysis of manufacturing growth in the US since 2012 by examining data on 373 different metropolitan statistical areas. According to its data, the largest manufacturing regions in the country are largely located in the South:

1.    Orlando-Kissimmee-Sanford, Florida. Manufacturing jobs in Central Florida have grown by 23.6% on the strength of large companies such as Lockheed Martin, Mitsubishi Hitachi Power Systems Americas, and Siemens Energy.
2.    Oakland-Hayward-Berkeley, California. Factory jobs in the Bay Area have increased by 22%, fueled largely by the manufacturing needs of the tech industry.
3.    Grand Rapids-Wyoming, Michigan. The number of industrial jobs in West Michigan has risen by 20.5%, amounting to a fifth of all non-agricultural jobs in the area.
4.    Miami-Miami Beach-Kendall, Florida. Factory-type jobs in South Florida have grown by 22.6%, reflecting Florida’s generally favorable conditions for manufacturers. Indeed, the state’s sector manufacturing has recorded growth for 86 consecutive months.
5.    West Palm Beach-Boca Raton-Delray Beach, Florida. The number of manufacturing jobs in Miami’s northern neighbor has risen by 27.3%. In general, Florida is a strong state for manufacturing because of its lack of an income tax, relatively low housing costs, and pro-development policies. 

Why It Makes Sense to Invest in Manufacturing

While American manufacturing is currently enjoying sustained growth and development, the sector could expand further in the coming years. A strong manufacturing sector in the US should encourage competition from rapidly developing countries such as China and India, providing American manufacturers with the opportunity to further improve the quality of their products while reducing operating costs.

The revival of American manufacturing will largely depend on the state of the country’s infrastructure. Because American manufacturing largely depends on the country’s energy, transportation, utility, and communication systems, reduced spending on infrastructure poses a significant restriction on the sector’s future growth. With robust investment, however, manufacturing will likely continue to grow at its current pace.

In an increasingly digital economy, manufacturing continues to spur more economic activity than any other sector, with every dollar spent on manufacturing generating another $3.60 in economic activity. Having seen an increase in orders from manufacturing companies ourselves, we at PEER Bearing remain deeply committed to advancing it however we can. If your company is looking for a manufacturing partner to fulfill its bearing needs, contact us for more information.

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