If the latest numbers are any indication, the American manufacturing industry will rocket into 2018, even as hurricanes Harvey and Irma continue to show their effects. According to the latest report from the Institute of Supply Management (ISM), the national factory activity index soared to pre-recession levels with a reading of 60.8% in September, “the highest reading since May 2004.”
Continued growth
This 13-year high in manufacturing has been powered in part by robust gains in new orders, which increased to 64.6%, showing growth for 13 months straight. Strong employment also contributed, which rose to 60.3%, its highest level in six years. And rising raw material prices brought the prices index to a reading of 71.5%, the highest since May 2011.
These recent high readings all point to an expanding manufacturing sector, which makes up approximately 12% of the U.S. economy, as well as strength in the nation’s economy as a whole. In fact, the economy grew for the 100th consecutive month in September, according to the ISM report.
Hurricane impact and recovery
However, the ISM also indicated that hurricanes Harvey and Irma are having a dampening effect on future manufacturing readings, cutting as much as 0.6% from gross domestic product growth in the third quarter. The devastation caused by both hurricanes has dragged on homebuilding, home sales, and the chemical products sector, as many Houston-area refineries and chemical plants were forced to shut down. The storms have also interfered with production in the food, beverage, and tobacco products industries with factories taking longer to deliver goods.
Now that recovery efforts are underway, building and flood supplies have shown an increased spike in demand. According to mid-September data from the Thomas Index, Houston-area buyers searched for steel building suppliers on ThomasNet.com 1,700% more often than before Harvey. Demand for two-way radios also increased 2,500%, and transformers were searched for at a 1,700% higher rate. Even new hospital beds were sought after at a 7,000% higher rate.
Even after accounting for the impacts from hurricanes Harvey and Irma, the manufacturing forecast remains optimistic. The resiliency of the recent ISM readings won’t be determined until the third quarter after the impacts from hurricanes Harvey and Irma are fully realized. But all signs are pointing to the fact that an expansion in American manufacturing — and the U.S. economy as a whole — will remain intact as we go into 2018 and beyond.