Manufacturing reported good news yesterday. Does it make a difference?
Yesterday the nation’s purchasing managers noted that their index of manufacturing activity rose more than economists expected. Many had expected that the story of slowing economic growth would be confirmed yet again by another economic indicator. But this index didn’t keep to the story line, and showed that the nation’s factories increased production.
The details were impressive: of the 15 different industries broken out in the report, 11 increased and four decreased. The ones that went up were quite diverse-leather, electrical equipment, machinery, food. The ones that went down seemed to be centered around energy production and printing. This is unquestionably good economic news. Factory managers wouldn’t be expanding production if they didn’t have the orders in hand to do so.
But the really interesting story has to do with global production. By the broadest measures, US production is back to the level it was in 2005, up from its recession lows where it got back to 1998’s level. But global production has now surpassed the all-time-high that was set in March 2008. Global production has now grown beyond its previous pre-recession record.
We live in a global economy, and what was alarming about the financial crisis was it’s universal character: every place seemed to go into a downturn. But following an unprecedented level of international policy coordination, we seem to be on the road to recovery. With the world’s economy growing, any local slowdown should be short-lived.
Douglas R. Tengdin, CFA
Chief Investment Officer
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