US manufacturing activity to remain strong in 2012 – analyst

01 March 2012 21:12  [Source: ICIS news]

LAS VEGAS, Nevada (ICIS)--US manufacturing activity will likely remain healthy through 2012, driven by a robust automotive market, although the rate of growth is expected to flatten out, an analyst said on Thursday.

“The fact that the ISM Manufacturing PMI [purchasing managers index] for February came out at 52.4 versus 54.1 in January is not a huge negative by any means,” said Norbert Ore, director of proprietary research at Strategas Research Partners.

“At this point in the cycle, we should expect manufacturing to plateau,” he added.

Ore, the former chairman of the ISM PMI survey, spoke at the ISM Chemical Group Conference in Las Vegas.

The ISM Manufacturing PMI measures activity based on a survey of over 350 purchasing executives. Any level above 50% indicates expansion, while under 50% indicates contraction.

He said he expects the US ISM Manufacturing PMI to average 53.5 for 2012.

“Manufacturing has come back and is now highly dependent on the consumer. Consumers have already shown they won’t buy houses. But they will buy autos,” said Ore.

 “Auto sales benefit a wide range of manufacturing industries from electronics to metals to chemicals and plastics. This can carry much of manufacturing going forward,” he added.

US automakers Ford, General Motors and Chrysler reported substantial US sales gains for February.

General Motors estimated that US auto sales are running at about a 14m annual clip.

That rate “will be a huge plus to manufacturing if we can sustain this level,” said Ore.

Inventories remain relatively low with manufacturing customer inventories at 46.0% and manufacturing inventories at 49.5%.

Manufacturing new orders are also growing faster than inventories, noted Ore, with the spread at 5.4% for February.

“You want to be in the 5-15% range where new orders are growing faster than inventories,” he said.

An encouraging sign was the manufacturing new export orders at 59.5% for February, said the analyst.

“The overall manufacturing economy is holding up a lot better than just the domestic market. This will help us going forward,” said Ore.

The analyst characterised the US economy as in mid-cycle expansion mode.

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy

Author: Joe Chang

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