V-Shaped Recovery: Manufacturing Defies Expectations as Rebound Continues Despite Covid Surge

DALTON, GEORGIA - JANUARY 04: U.S. President Donald Trump holds two thumbs up during a Republican National Committee Victory Rally at Dalton Regional Airport January 4, 2021 in Dalton, Georgia. President Trump campaigned for the two incumbents, Sen. David Perdue (R-GA) and Sen. Kelly Loeffler (R-GA), for tomorrow’s runoff elections …
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The strength of U.S. manufacturing appears to have been largely unshaken despite the recent surge in coronavirus infections.

The Institute for Supply Management said Tuesday its manufacturing index rose to a reading of 60.7 in December from 57.5 in the prior month, marking the highest level since 2018.

Economists had expected a small decline in the index, which is based on surveys of manufacturing sector senior executives.

“The manufacturing economy continued its recovery in December,” said ISM’s Timothy R. Fiore. “Survey Committee members reported that their companies and suppliers continue to operate in reconfigured factories, but absenteeism, short-term shutdowns to sanitize facilities and difficulties in returning and hiring workers are causing strains that are limiting manufacturing growth potential.”

New orders matched their pandemic high at a reading of 67.9, up from 65.1, signaling that the sector has been more resilient in the face of the pandemic’s winter surge than many other parts of the economy. President Donald Trump made strengthening U.S. manufacturing a key part of his campaign in 2016 and his administration deployed many policies to bolster the sector.

“Our company and industry are continuing to have tailwinds from the COVID-19 pandemic research support for vaccines and treatments. While our services are delayed, many customers are not canceling outright, and business picked up for us in the last month — especially in China, where business growth is back on track, ” an executive from the Computer & Electronic Products segment said.

“Business is stronger than expected, with higher demand for many products. Volatility continues due to the very persistent pandemic and associated risks,” according to an executive in the Electrical Equipment, Appliances & Components sector.

Executives in machinery and miscellaneous manufacturing said sales were above pre-pandemic levels. A food services and beverages segment executive, however, said the environment was more challenging than in the spring.

“COVID-19 is affecting us more strongly now than back in March. Vendors/service suppliers unable to maintain levels of service due to employee shortages. Logistic issues also hurting us due to coronavirus-related problems,” the executive said.

The production gauge jumped 4 points to 64.8. The employment component, which had registered a contraction in November, moved up 3.1 points to 51.5.  Readings above 50 in the index indicate expansion.

The employment gauge was negative for 14 consecutive months before clambering into positive territory in October, only to drop below 50 again in November.

Sixteen of the 18 subsectors included in the index expanded, matching November. The greatest growth was in Apparel, Leather & Allied Product, a segment that has suffered greatly during the pandemic as work-from-home stifled demand for clothing.


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