Northwest Arkansas Democrat-Gazette
Manufacturing grows in U.S. for third-straight month
WASHINGTON — American factories expanded for the third-straight month in May, helped by a weaker U.S. dollar.
The Institute for Supply Management said Wednesday that its manufacturing index rose to 51.3 last month from 50.8 in April. Anything above 50 signals growth.
“Manufacturing is starting to look better,” said Scott Brown, chief economist at Raymond James Financial Inc. in St. Petersburg, Fla. “It’s an encouraging sign that things aren’t unraveling. Ultimately, production is going to increase because of stronger consumer demand.”
The index was stuck below 50 from October through February as American factories struggled with economic weakness abroad and a strong dollar that made U.S. products more expensive in foreign markets. The dollar has fallen against other major currencies since the end of January, giving factories some relief.
“Manufacturing has stabilized,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a research note. “The weaker dollar this year has already made a material difference to exporters.”
In China, two surveys released Wednesday showed
that factory activity remains feeble, worrying global investors. An official index from the Chinese Federation of Logistics and Purchasing came in at 50.1, unchanged from April.
Separately, the private Caixin/ Markit survey was more pessimistic, with activity falling to 49.2 in May from 49.4 the previous month. Total new business fell for the first time in three months while new export orders declined for the sixth-straight month, Caixin said.
The Chinese reports suggest that the nation has little to show for its recent efforts to stimulate the world’s second-biggest economy, which has been decelerating since 2010.
In the United States, the Institute for Supply Management reported that manufacturers’ new orders and production grew more slowly in May. Export orders and a measure of employment were unchanged. The index was pulled up by an increase in deliveries from suppliers. Overall, 12 of 18 manufacturing industries reported growth last month, led by wood products manufacturers and textile mills.
The institute, a trade group of purchasing managers, surveys about 200 U.S. companies each month.
“Things, for me, are pointing in the right direction,” Bradley Holcomb, the institute’s chairman of the survey, said during a conference call with reporters. With businesses having pared stockpiles and orders picking up, “there’s a bit of an inventory shortage” and “suppliers are now having a harder time catching up so they’re slower.”
The overall tone of the comments from manufacturers in the survey was “cautiously optimistic,” he said.
American manufacturing has been sending out mixed signals recently.
The Commerce Department reported last week that orders to U.S. factories for long- lasting manufactured goods rose 3.4 percent in April, the most since January. But the details of the durablegoods report weren’t as positive. Most of the April strength came from the volatile commercial aircraft category, and a measure that tracks business investment fell for the third- straight month.
The U.S. economy got off to a rough start this year, growing at a revised lackluster 0.8 percent annual pace from January through March.
Manufacturers’ troubles weighed on growth. But economists expect the growth rate to rise to perhaps 2.5 percent in the second quarter as a robust American job market gives consumers the incomes and confidence to spend more. Employers have added a healthy 2.7 million jobs over the past year.
Tepid U. S. economic growth has been too weak to lift the stagnant global economy, economists said Wednesday.
The Organization for Economic Cooperation and Development, composed of the 34 most advanced economies, said it is up to governments in the U.S. and elsewhere to increase spending to jolt the global economy out of a “low-growth trap.”
The organization said the Federal Reserve and other central banks have done all they can with low — and in some cases below- zero — interest rates.
According to the Investopedia website, a negative interest rate means the central bank and perhaps private banks will charge negative interest: Instead of receiving money on deposits, depositors must pay regularly to keep their money with the bank. This is intended to give banks an incentive to lend money more freely and businesses and individuals to invest, lend, and spend money rather than pay a fee to keep it safe.
“Without comprehensive, coherent and collective action, disappointing and sluggish growth will persist, making it increasingly difficult to make good on promises to current and future generations,” Catherine Mann, the Organization for Economic Cooperation and Development’s chief economist, said as the group released its semiannual world economic outlook.
“Citizens of the global economy deserve a better outcome,” she said, calling the need to act “urgent.”
The U. S. economy will expand 1.8 percent this year, down from 2.4 percent last year, the organization said. The forecast is down from 2.5 percent in November and 2 percent in an interim report in February.
The world economy is forecast to expand 3 percent in 2016, the same as in the earlier forecasts. Slower growth in the U. S. will be offset by slightly stronger performances in Europe and Japan, the organization said.