Growth at American Manufacturers Cools as Challenges Persist

[Purveyor]

Source: Bloomberg

May 2, 2016 — 10:00 AM EDT
Updated on May 2, 2016 — 10:17 AM EDT

Manufacturing expanded at a slower pace than forecast in April as factories continued to grapple with lax global demand and fallout from a weakened U.S. energy industry.

The Institute for Supply Management’s index declined by 1 point to 50.8, barely above the 50 level that indicates stagnation, the Tempe, Arizona-based group’s report showed Monday. The median forecast in a Bloomberg survey of economists was 51.4.



American factories have been beset by dollar strength and weak commodities prices for more than a year, as well as a recent cooling of household spending. While emerging economies are showing hints of stabilizing and the biggest cutbacks by U.S. oil producers have run their course, high business inventories relative to sales represent an additional hurdle for factories.

“Manufacturing continues to muddle through at a very low growth rate,” Brett Ryan, U.S. economist at Deutsche Bank Securities Inc. in New York, said before the report. “We’re dealing with the lagged impact of what previous dollar appreciation has done, and added to that we have a domestic inventory overhang, and that’s just going to keep manufacturing kind of on the sidelines.”

Read more: http://www.bloomberg.com/news/articles/2016-05-02/growth-at-american-manufacturers-cools-as-challenges-persist

[forest444]

1. The Purchasing Managers Index and industrial production numbers aren't one and the same.

While it is a reasonably good proxy index (industrial production has in fact slid by 2% y-o-y), the PMI is still basically a survey of (mostly Republican) industrial purchasing managers and is thus subject to purely subjective criteria (including, of course, political sentiment).

The political angle behind using the PMI in lieu of hard industrial production figures has not gone unnoticed by the similarly GOP-leaning business press: it was precisely during the 2000 election season that they began substituting the PMI for time-honored industrial production number, knowing that (at the time) all the hard economic indicators were on Gore's side; but that the more subjective indices could be used to change the narrative.

Again, the PMI is not without its merits; but all in all, to paraphrase Gore, it's still fuzzy math.