Manufacturing seems to be roaring back and helping with the economy. It is a large sector of the U.S. that was down during the financial crisis from 2008 to 2010. Here recently, it appears to be coming back very nicely. One thing to look at is the absolute growth of manufacturing. This consists of manufacturing orders that exclude aircraft purchases. The reason these purchases are normally excluded by manufacturers and economists is because they are very large purchases that tend to skew the numbers. Another thing to look at is the capacity utilization in the plant. During the financial crisis this percent was as low as 65%. Currently, that number sits around 85%. So whether you look at absolute numbers of what’s going out of manufacturers’ doors or how efficient they are with more orders, all of it is improving.
Four Important Factors
We have highlighted four main reasons of why we think this information is so important to manufactures and economists. The first is that manufacturing has a large, positive multiplier effect. For every one job inside a manufacturing plant there are, on average, 3 or 4 people outside the plant being hired, for example, suppliers and truck drivers. Secondly, manufacturing accounts for 75% of research and development expenditure in the United States. This is a huge number as manufacturers are always trying to improve the product of large ticket items such as automobiles and computers. The third item is to simply look at how large manufacturing is. If you isolated manufacturing as one sector of the U.S. economy and ranked It with the GDP levels of the world, it would rank 9th in the world. The sector is very large in absolute terms. Fourth, is that the average salary of a manufacturing worker across the country is over $82,000. That is a very good wage that translates into more consumer purchases. If you look at the 4 things, growth in this sector seems to be particularly good and has a large impact on the economy.
Ashley Page, JD, MBA
Senior Vice President
Email Ashley Page here
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
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