Growth ahead for manufacturing sector

The U.S. manufacturing sector is likely to continue its rebound for the second half of the year, based on recently released statistics and several surveys of manufacturing companies.

Although growth slowed in June, the manufacturing sector continued its growth last month, according to the most recent report released by the Institute for Supply Management. The institute’s June manufacturing index fell to 56.2 in June from 59.7 in May. Any reading above 50 indicates growth.

“We are now 11 months into the manufacturing recovery and given the robust nature of recent growth, it is not surprising that we would see a slower rate of growth at this time,” said Norbert Ore, chair of the ISM Manufacturing Business Survey Committee. “The sector appears to be solidly entrenched in the recovery. Comments from the respondents remain generally positive, but expectations have been that the second half of the year will not be as strong in terms of the rate of growth, and June appears to validate that forecast.”

Other recent reports indicate the continuing growth amongst American manufacturers.

In its most recent Industrial Production and Capacity Utilization report, the Federal Reserve shows that industrial production grew 1.2 percent in May, after a 0.7 percent rise in April. Manufacturing output rose 0.9 percent. It was the third consecutive month of approximate 1 percent gains in the manufacturing sector, the report says.

The country’s manufacturing capacity utilization was about 71.5 percent in May, a 0.7 percent increase from April. Although capacity utilization has improved by 6.4 percent since June of 2009, it is still 7.7 percentage points below its average from 1972 through 2009, the Federal Reserve report says.

The most recent Manpower Employment Outlook Survey released last month indicates a continued optimism amongst manufacturers. According to the survey, about nine percent of durable goods manufacturers, 12 percent of non-durable manufacturers, and 17 percent of the manufacturers in the mining sector plan to hire additional workers during the third quarter of 2010. And employers in the transportation, utilities and construction fields also expect to increase employment.

“We have been waiting for the labor market to show signs of sustained recovery,” said Jeff Joerres, chairman and chief executive officer of Milwaukee-based Manpower Inc. “The survey results for the third quarter are indicating a trend of hiring retention that has historically proven to be the positive inflection point of accelerated job growth.”

Recent auto sales numbers show improvement compared with last year, but also reflect a potential slowdown.

Chrysler Group LLC posted a 35-percent increase in U.S. sales for June from the year before. Ford Motor Co.’s total sales rose by 13.3 percent. General Motors’ total vehicle sales rose by 10.7 percent. However, month-to-month sales tell a different story. Chrysler’s sales fell from 104,819 units in May to 92,482 in June. Sales for both GM and Ford dropped 13 percent in June from May. GM’s truck sales have remained strong, giving the company continued hope for strong sales for the year.

“As companies continue to invest in their businesses, we expect this segment to continue to recover,” said Don Johnson, vice president of U.S. sales operations for GM. “We think the release of some pent-up demand in the pickup market is an indication that a fundamental part of the U.S. economy is gradually strengthening.”