As demand from overseas markets has cooled while domestic markets have remained steady, U.S. factories have begun to expand at a sustainable rate. Although there has been slowed order growth due to falling energy prices, many production facilities are likely to produce at the same or higher levels. This is due in part to increased consumer spending resulting from falling oil prices and higher employment rates.
U.S. economist Michael Montgomery from IHS Global Insight believes manufacturing will keep expanding even with the lower rate of exports because demand is gaining stateside. The Markit Economics gauge saw a decrease in manufacturing in the U.S. with an 11 month low marked last December. The index dropped from 54.8 to 53.9.
U.S. on Top as a Global Producer
Globally, many countries are seeing decreases in their manufacturing output. Those based in Europe saw a 17 month low by last November while China had come to an 18 month low, according to factory purchasing managers.
However, in the U.S., numbers from last year show stocks maintaining while erasing previous losses. Gains in both the energy and utility sectors offset declines in small caps while the S&P 500 Index dropped less than 0.1%. Out of 18 industries surveyed by purchasing managers’ group, 11 posted growth, including those in the metal, printers, and furniture sectors.
Due to lower crude oil prices, input costs were down and were the lowest since the summer of 2012. Chemicals, plastics, and the primary metals industries all paid lower prices during December. In total, 13 manufacturing industries reported they paid lower prices. Since the economy in the U.S. is expanding and consumer spending is up by 3.2%, the orders will likely keep factories busy in the future. Consumers account for just shy of 70% of the U.S. economy.
With employment up and gas prices down, Americans are helping to keep the economy afloat, and one of the largest manufacturers to benefit is carmakers. Auto sales are rising and from October to November of last year, they increased to 17.1 million from 16.4 million. However, some U.S. manufacturers will be hurt by overseas markets due to recessions in other parts of the world like Russia, who is facing economic decline from decreasing oil prices.