US Manufacturing Sector Sees Expansion Continuing

January 3rd, 2012 by

The United States economy seems to be extending its post-recession recovery after a setback in the second half of last year, according to data released this morning by the Institute of Supply Management. According to the ISM, its index (which tracks the activity of purchasing managers) rose to 53.9 in December from 52.7 in November, a higher reading than economists had predicted. Any level above 50 signifies an expansion in economic activity in the manufacturing sector.

As can be seen in the chart below, the ISM’s reading of manufacturing sector activity had rebounded sharply in the immediate aftermath of the 2008/2009 recession, only to retreat again last summer in response to worries that Europe’s sovereign debt crisis would derail global growth.

While economists still fret about the European economic woes spilling over into the U.S. and creating tailwinds for what remains the world’s largest single economy, it is worth noting that the paths of the manufacturing sectors in the United States, Europe and China appear to be diverging. The chart below compares the results of purchasing managers’ indexes for all three regions. With the last handful of ISM readings, the U.S. manufacturing industry appears to be staging a solid if not spectacular upward move, while both the European and Chinese measurements suggest that manufacturing activity in both is contracting rather than expanding.

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