Manufacturing data provides blueprint for economic growth

Manufacturing is indeed making a significant contribution to overall GDP growth and perhaps leading the way.

By ·

Third quarter GDP growth was up 2.5 percent compared to 1.3 percent in the second quarter. And according to the Institute for Supply Management (ISM), its most recent PMI, which gauges manufacturing output, hit 50.8 in October, which equates to 2.9 percent GDP growth.

As LM has reported, any PMI reading at 50 or higher indicates economic growth is occurring.

That said, manufacturing is indeed making a significant contribution to overall GDP growth and perhaps leading the way, said Bradley J. Holcomb, CPSM, CPSD, chair of the ISM Manufacturing Business Survey Committee, in a recent interview.

“If the rest of the sectors were at our level, real GDP would be closer to 3 percent,” said Holcomb.

What’s more, this strong manufacturing gains are coming at a time filled as any with economic uncertainty, given the current situation in Europe with the fate of the Euro hanging in the balance and myriad Southern European nations dealing with debt issues, relatively slight consumer spending here at home, and stagnant unemployment and housing markets.

The ISM’s manufacturing PMI was north of 60 for the first four months of 2011, a pace that even back then would be incredibly hard to maintain in this economic climate.

“Things were going gangbusters and in that type of environment you want to position yourself with higher inventories,” said Holcomb. “But with the PMI now in the low-50s over the past four months, lower inventory levels [October’s was 46.7] represents a bit of a wait and see attitude, with manufacturers posturing to be lean and flexible. A low inventory given the current PMI levels are good and that needs to be taken into consideration when looking at the big picture.”

And at the moment, there is now more of a broadly positive optimistic tone than there has been in the last few months, observed Holcomb.

Now, more than ever, perhaps, managing inventories correctly and proactively is more imperative than it has ever been for shippers.

This is especially true when taking a long view of the 2011 Peak Season, which was very slow to materialize, if really occur at all, due in large part to shippers being cautious in not wanting to face the ordeal of being stuck with too much stock, as was the case in a big way following the 2008 holiday season.


About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Latest Whitepaper
Improving E-Commerce Fulfillment Through Business Integration
As e-commerce continues to outpace conventional retail, companies of all sizes are finding ways to disrupt traditional business models and seize market share.
Download Today!
From the February 2017 Issue
As the new administration sends waves of uncertainly through the global trade community, this could be the best time ever for shippers to build an investment case for GTM. Here are five trends you need to watch if you’re about to put these savvy systems to work
Carrier Consolidation Keeps Shippers Guessing
Getting Value from the Cloud
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Advance your career with the fastest growing logistics certification – APICS CLTD
During this webcast presenters will give an overview of APICS and the new Certified in Logistics, Transportation and Distribution (CLTD) designation. Learn how the CLTD program can help you stay on top of current trends and advance your career.
Register Today!
EDITORS' PICKS
ASEAN Logistics: Building Collectively
While most of the world withdraws inward, Southeast Asia is practicing effective cooperation between...
2017 Rate Outlook: Will the pieces fall into place?
Trade and transport analysts see a turnaround in last year’s negative market outlook, but as...

Logistics Management’s Top Logistics News Stories 2016
From mergers and acquisitions to regulation changes, Logistics Management has compiled the most...
Making the TMS Decision: Ariens Finds Just the Right Fit
The third time is the charm for this U.S. manufacturer on the hunt for a third-party logistics (3PL)...