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IndustryNet Blog

The Big Picture Report on U.S. Manufacturing Conditions (January 2021)

Posted by IndustryNet on Monday, January 18, 2021


Following an unprecedented year, U.S. manufacturing companies finished out 2020 on a remarkably strong note, with key reports from the month signaling continued growth in the sector, even as other areas of the economy lagged behind.

Activity on the industrial marketplace IndustryNet continues to show increased search volume over last year for U.S. parts, products and services. IndustryNet helps buyers find suppliers in the industrial world and activity on the platform was 76% higher in December 2020, compared to the same month in 2019, with searches for everything from domestic steel and castings to conveyors and food products trending up significantly (you can follow our weekly search insights here).

Today, we’re bringing you the big picture look at manufacturing business conditions, compiling key takeaways from various reports on output, labor, new orders, optimism and regional activity.

Manufacturing Output Stronger in December

U.S. industrial production shot up 1.6% in December, following a meager 0.4% increase in November, according to the latest report from the Federal Reserve, released January 15th. The Industrial Production and Capacity Utilization report, released monthly is a composite index that includes manufacturing, mining and utilities.

Taken alone, manufacturing output increased 0.9% in December, while mining output increased 1.6% and utilities rose 6.2%.

Overall, the reading for industrial output in December is 3.3% below February’s 2020’s pre-pandemic level. Despite this, the nation’s industrial sector has recouped more than half of the record losses seen between February and April, when industrial production tanked 16.5%.

Taking a closer look at the Fed’s manufacturing data, the increase in output for the sector represents its eighth consecutive month of gains. Meanwhile, capacity utilization for manufacturing rose 0.7% to 73.4%. This is 13.3% higher than its lowest level recorded in April, but still falls short of its long run average by 4.8%.

Looking at the data by subsector, manufacturing output gains were generally evenly divided between durable and non-durable goods, with durable goods manufacturing posting a 1% increase and nondurable goods manufacturing increasing by .9%.

On the durable goods side, non-metallic mineral products posted the largest gain, up 3.3%. This was followed by aerospace and miscellaneous transportation equipment, up 2.5%; primary metals, also up 2.5%; wood products, up 2.3% and machinery up 2.1%.

On the non-durable goods side, plastic and rubber plastics posted the largest gain, up 3.2%; followed by textile mills, up 1.8% and petroleum and coal products, up 1.5%.

Losses were few and far between in December, limited to motor vehicles and parts, down 1.6%; printing/related support activities, down 1.4%; and computer and electronic products, down .6%.

The Fed’s year-over-year data paints a sobering picture of COVID-19’s impact on the manufacturing sector, with many industries posting double-digit losses, when compared to December of 2020. Motor vehicles and parts was the industry to post a significant year-over-year gain, up 3.6% from this time last year. Apart from the auto industry, food processing and wood products posted minor gains year-over-year, both up 0.4%.

Manufacturing Sector Among Few to Add Jobs in December

In the month of December, U.S. manufacturers hired at a slightly brisker pace, adding 38,000 jobs, compared to 27,000 jobs in November. This stands in contrast to the U.S. economy as a whole, which shed 140,000 jobs in December. The U.S. factory sector is still 543,000 jobs short of pre-pandemic levels, even as unfilled positions in U.S. manufacturing have hit an all-time high.

In December, job gains were spread out across multiple industries, but were strongest in motor vehicles parts (+ 6,700); non-metallic mineral products (+6,100); food processing (+5,500); apparel (+4,000); petroleum and coal (+3,200); machinery (+2,800) and fabricated metal products (+2,700).

Similar to the industrial output report, just two industries posted job losses in the manufacturing sector: miscellaneous non-durable goods manufacturing saw a drop of 11,200 jobs, while primary metals shed 2,100 jobs.

Manufacturing Activity Expands at Fastest Pace in Two Years

Following November’s lukewarm ISM report, manufacturing companies finished the year out strong, with industrial activity expanding at its fastest pace in two years. The Institute for Supply Management’s monthly report on business found manufacturing activity surged to a two-year high in December, climbing 3.2% in December to a reading of 60.7%. Any reading over 50 is considered expansionary.

Manufacturers saw new orders and production surge in December, while the employment metric rose back into expansion. The New Orders Index rose 2.8% to a reading of 65.1%.

Meanwhile, the ISM’s Production Index rose 4% to a reading of 64.8% and the employment index climbed 3.1% to a reading of 51.5%.

Optimism trended up among executives, with the ISM reporting three positive comments for every one negative comment. One executive in the fabricated metals sector stated, “Current business outlook is strong through the first quarter of 2021. We are anticipating 20 percent growth in sales for 2021

Regional Surveys Show Manufacturing Expansion, but Growth is Slower

Empire State Manufacturing SurveyNew York factory activity was little changed in the first half of January, with the general business conditions index holding steady at 3.5 (compared to 4.9% last month). The survey reports 27% of executives responding to the survey indicated improving business conditions, while 23% reported worsening business conditions. The survey reported sluggish growth overall for manufacturing, with new orders rising just 3 points to 6.6, while shipments fell to a reading of 7.3. Optimism for future business conditions remained steady at 31.9%.

Texas Manufacturing Outlook SurveyTexas factory activity expanded at a faster rate in December, according to the Dallas Fed’s regional monthly report. also expanded for a sixth straight month in December. Notably, production rebounded significantly from 7.2 to 25.2, while new orders rose 11 points to 17.8. Capacity utilization and shipments both rose significantly in December, while optimism strengthened.

Kansas City October Manufacturing Survey. Factory activity in the 10th District (encompassing Kansas, Colorado, Nebraska, Oklahoma, Wyoming, northern New Mexico and Western Missouri) also expanded in December, but activity levels are still below what they were one year ago.

• Fifth District Survey of Manufacturing Activity (Richmond Fed) Manufacturing activity in the 5th District, which includes Maryland/D.C.; North Carolina, South Carolina, Virginia and most of West Virginia, expanded slightly in December. The Richmond Fed’s activity index rose to 19 in December from 15 in November (anything over “0” indicates expansion).

The survey suggested that although employment and wages continue to be on the upswing, many industrial companies are having trouble finding workers. Increases in new orders and capital spending also contributed to the increase in activity.

Industrial Solutions for Changing Times

At MNI, our mission is to help U.S. businesses thrive, providing tried-and-true prospecting and procurement solutions since 1912. Powered by trusted MNI data, IndustryNet is an industrial marketplace that connects industrial buyers with 400,000 U.S. manufacturers and suppliers of more than 10,000 types of products and services. Set up a free account, search for suppliers, send quote requests and more with this free industrial marketplace.

IndustryNet is also a direct path for U.S manufacturers to increase their visibility among domestic procurers. MNI also makes it easy for industrial companies to expand into new markets. Click here to learn about how an IndustrySelect subscription can help you develop the right pool of leads for your product. 



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