The Factory-Sector Sees Surge, More Growth to Come

Kerry Lear

8 years ago

January was another great month for U&period;S&period; factories because businesses are continuing to invest in more equipment&period;&NewLine;&ldquo&semi;Sales of such long-lasting goods indicates companies are investing to expand their production capacity&period; The lead time for filling those orders rose 8&percnt; over the month because factories are being flooded with new orders, said Tim Fiore, head of the ISM survey,&rdquo&semi; writes Wall Street Journal&period; &nbsp&semi;&NewLine;Last week, the Institute for Supply Management (ISM)&nbsp&semi;reported that the factory activity is at its third-highest level since 2011&period; This means there has been an increase in product sales, factory employment and raw-material prices&period; &nbsp&semi;&NewLine;New orders, specifically, saw a slight decline from December, but still remained high at 65&period;4&period; There was such a demand, that manufacturers are struggling to keep up, according to Jennifer Lee, a senior economist at BMO Capital Markets in Toronto, as reported by Reuters&period;&NewLine;&ldquo&semi;Manufacturers reported an increase in export orders and most offered an upbeat assessment of business conditions,&rdquo&semi; writes Reuters&period; &ldquo&semi;Manufacturers of computer and electronic products said, &ldquo&semi;budgets are being approved for new projects&period;&rdquo&semi; Furniture manufacturers reported that &ldquo&semi;our usual winter slowdown has not occurred, and we are very busy with new orders&period;&rdquo&semi;&NewLine;Prices for raw materials are on the rise too&period;&NewLine;&ldquo&semi;We&rsquo&semi;re still accelerating,&rdquo&semi; said Tim Fiore, the head of the ISM survey&period; &ldquo&semi;There are a lot of strong feelings 2018 is going to be a good year&period;&rdquo&semi;&NewLine;As the U&period;S&period; economy continues to grow and businesses pick-up in spending, the more the factory sector will see a surge&period;&NewLine;The new GOP tax plan will evidently foster economic prosperity and the unemployment rate is at an all-time low&period; The massive cut of the corporate tax rate from 35&percnt; to 21&percnt; will give businesses additional revenue to spend elsewhere&period; &nbsp&semi;&NewLine;&ldquo&semi;Healthy demand for U&period;S&period; manufactured goods should persist especially as savings from tax cuts is spent, and as long as healthy global demand persists,&rdquo&semi;&nbsp&semi;said Fotios Raptis, senior economist at TD Economics&period;&NewLine;&ldquo&semi;The president gets credit for boosting overall business optimism and consumer confidence, although both had been rising for years before he took office&period; But a weaker dollar, which makes it easier for American companies to sell products abroad, and an ever-stronger global economy have also helped factories grow,&rdquo&semi; writes CNN Money&period; &nbsp&semi;&NewLine;Factory output growth in Japan, China, Greece, Italy, Germany and France has also increased in response to the global demand for new orders&period;&NewLine;&nbsp&semi;&ldquo&semi;The eurozone&rsquo&semi;s manufacturing boom continued in full swing in January&period; Output grew at one of the fastest rates recorded over the survey&rsquo&semi;s 20-year history, matched by a further near-record surge in new orders,&rdquo&semi; said Chris Williamson, chief business economist at IHS Markit to The Guardian&period; &nbsp&semi;&NewLine;But as more consumers and businesses spend the more inflation becomes an issue&period; To counteract this, the Federal Reserve has said that this year there will be three rate increases&period; &nbsp&semi;&NewLine;These will slow down the economy, so it doesn&rsquo&semi;t burst&period;&NewLine;&ldquo&semi;The labor market is near full employment, with the jobless rate at a 17-year low of 4&period;1 percent&period; A tightening of labor market conditions has raised optimism among Fed officials that inflation will rise toward the U&period;S&period; central bank&rsquo&semi;s 2 percent target this year,&rdquo&semi; write Reuters&period;&NewLine;Author&rsquo&semi;s note&colon; Manufacturing jobs generally pay more, which will provide another boost to the economy&period;&nbsp&semi;The spike in growth in the factory sector is just after Trump&rsquo&semi;s first year too, even before the tax plan kicks in&period; This is just the beginning&period;&NewLine;&nbsp&semi;&NewLine;