U.S. Manufacturing Grows in Nov. to Two-Year High

WASHINGTON (TheBlaze/AP) -- Manufacturing in the United States grew at its fastest pace in two years in November as manufacturers kept pace with steady demand, the Institute for Supply Management said Monday.

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November’s index of manufacturing activity came in at around 57.3, according to the ISM, the highest it has been since April 2011. Analysts had expected the survey to come in at around 55.2, down from October’s 56.4.

Meanwhile, the employment sub-index increased to 56.5, up from its previous posting of 53.2. That’s an 18-month high.

Overseas demand came primarily from Europe, Japan and China.

The ISM is a trade group of purchasing managers.

Manufacturing activity has now expanded for six straight months after hitting a rough patch in the spring. Whether the gains will continue is questionable. But for now, it has been healthy.

Oddly enough, the ISM's positive report conflicts with weaker data on factory activity, making it difficult to see if there's a trend.

"We continue to believe that this indicator is overstating the health of the broader economy," said Joshua Shapiro, chief U.S. economist at MFR Inc.

For example, businesses cut back on orders for long-lasting factory goods in October, according to a government report Wednesday. Orders for durable goods, which are meant to last three years, fell by two percent.

A fall in aircraft demand drove the decline. But companies also spent less on machinery, computers and metal parts.

One reason for the divergence could be that the ISM's index doesn't adequately measure smaller manufacturers, according to Ian Shepherdson, an economist at Pantheon Macroeconomics. Larger companies are likely benefiting more from recoveries overseas.

Separate reports Monday showed that manufacturers in China and Europe expanded in November, though more slowly than in the United States. Still, factories in Europe grew at the fastest pace in nearly two years, according to a survey by Markit.

As Rob Wile writes in Business Insider, "things are looking alright in the sector":

Image source: BI.

Another reason for the conflicting reports may be that production of non-durable goods appears to be stronger than production of durable goods. For example, the ISM report showed that manufacturing in non-durable areas like the food, textiles, petroleum, chemical and paper products industries grew. At the same time, some durable goods industries, such as machinery, contracted in November.

Separately, factory output rose for a third straight month in October, according to the Federal Reserve, driven higher by greater production of primary metals and furniture.

The mixed picture comes as the economy is thought to be slowing in the October-December quarter to an annual rate of 2 percent or less. That would be down from a 2.8 percent annual pace in the July-September quarter.

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