Reuters reported this past week that the Purchasing Managers Index of “flash” manufacturing was at 51.5 for the month of September, pointing to slow growth which has been a trend over the last few months.
The index averaged 51.5 in the third quarter, below the 54.2 registered between April and June, for its worst showing since the third quarter of 2009. At 51.2, the output component was the lowest since September 2009.
“With output growing at the slowest pace since the recovery began, the manufacturing sector may have even acted as a slight drag on the economy in the third quarter,” Markit chief economist Chris Williamson said.
This drop can be attributed to fewer exports, a trend that has been seen for the last few months:
Manufacturing had been one of the few positive contributors to growth through 2010 and 2011 but began to slow earlier this year. Recessions in several European countries and slower growth in Asia have contributed to that by undermining U.S. exports.
While overall new orders received by U.S. factories rose in September, firms endured the steepest reduction in new export orders in nearly a year. The decline in exports this month was the fourth in a row.
Earlier this month, NPR reported that the slowing growth of manufacturing in the U.S. and the drop in U.S. exports was in part due to the financial crisis taking place in Europe.
U.S. factory activity shrank for a third straight month in August, according to a survey by the Institute for Supply Management released Tuesday.
Manufacturing has slumped as American businesses have scaled back demand for machinery, equipment and other investments. It’s also contracting in just about every major economy overseas, including the 17 countries that use the euro, plus Britain, China, Japan and Brazil. In China, factory activity fell last month to its lowest level in more than three years.
Even so, the manufacturing sector was able to add 135,000 jobs in August. This may not be a large number of new jobs, but it is a move in the right direction.
Though there has been slowed growth and a decline in exports, consumer inflation has stayed relatively low at 1.7 percent. On top of this, the U.S. Central Bank announced that it would be purchasing mortgage bonds in order to inject more money into the financial system, keeping inflation rates near zero. Ben Bernanke, Chair of the Federal Reserve, has announced that the Fed will be acting to further help the economy:
Chairman Ben Bernanke last Friday said the Federal Reserve will do more to help the still-struggling U.S. economy. He stopped short of committing the Fed to any specific move.
Some economists predict the Fed will announce a third round of bond purchases after it meets on Sept. 12-13. The purchases are meant to lower long-term interest rates and encourage more borrowing and spending.
Though the reports point out that manufacturing growth has declined over the past quarter, it is still growing, along with employment, with a boost from the Fed and Central Bank.
Eagle Technologies Group is an industry leader in the design and installation of factory automation systems worldwide.