U.S. Manufacturing Growth Slows in July, Despite $11 Billion in Construction Starts

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Researched by Industrial Info Resources (Sugar Land, Texas)--For the past year, the United States has been struggling to pull itself out of the grip of a recession. Recovery has been slow, thanks to the cautious approach most manufacturers are taking to increasing spending, combined with a slow housing market, high unemployment, and reduced consumer spending. However, the nation has been gradually digging itself out of the hole it fell into just a few short years ago. Manufacturing growth had been steadily increasing through the spring of 2010, but slowed down in the past few months as a result of lagging consumer demand. July continued that trend as manufacturing growth continued to slide, despite $11 billion in construction starts.

The Institute for Supply Management (Tempe, Arizona), a not-for-profit supply management association, indicated its manufacturing index fell in July to 55.5 from 56.2 in June. While a reading of more than 50 indicates growth, the decline in the index for the month shows that production slowed, and as a result, overall manufacturing growth continues to slow, as it has since the spring. Economists had expected a more significant decline for the month. This recent decline in growth proves that the economy has not fully recovered from the effects of the recession and that the recovery process could take longer than initially anticipated.

Despite the lag in manufacturing growth, more than $11 billion in capital and maintenance projects began construction activities during July in the U.S., another solid spending month during the prime summer construction period. The Power Industry was the leading spender, with $3.8 billion worth of projects beginning construction, while the Oil & Gas Transmission, Chemicals, Metals and Minerals, and Industrial Manufacturing industries each spent more than $1 billion, and the Food and Beverage and Biotech/Pharmaceuticals industries just missed the $1 billion threshold.

The Rocky Mountains region of the country was home to the majority of the project spending, with $2.3 billion in capital or maintenance projects beginning construction during the month. Several other regions, including the Great Lakes, Southeast, Southwest and West Coast, were closely following the Rocky Mountains, as each region saw spending in excess of $1.5 billion.

Overall, while manufacturing growth is slowing for a number of reasons, spending is remaining strong throughout the country. Manufacturers are continuing to invest in the future with new facilities or expansions and upgrades of existing facilities, rather than waiting for a full economic recovery. Confidence within the manufacturing sector grows on a monthly basis, as does the associated spending. The recovery process is certain to last well into 2011 if not beyond, and manufacturers are planning for the future by investing now, when jobs are at a premium. However, full and complete recovery has moved from the realm of pure fantasy to merely a distant light, and manufacturers will continue to aim for the light as the economy continues to recover.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.