Manufacturing Expands at Slower Rate

TEMPE, AZ-Though the US manufacturing industry is experiencing a positive turnaround, the rate of change is again decelerating, suggesting industrial property owners should not expect a quick pickup in demand for space. The Tempe-based Institute for Supply Management reports its manufacturing index, while remaining in expansion mode for the fourth month in a row, dropped to 53.6% in November from 55.7% in October.

“While the November manufacturing report indicates that the US factory sector continues to enjoy recovery from a deep six-quarter contraction, this report, along with other recent data, suggests that the pace of output growth will slow from the relatively rapid clip seen in the third quarter,” says Cliff Waldman, economist for the Manufacturers Alliance/MAPI in Arlington, VA. According to Waldman, much of the preceding months’ growth was catalyzed by an inventory turn along with a number of short-term fiscal stimulus programs.

A reading above 50% indicates the manufacturing economy is generally expanding, while a reading below 50% indicates contraction. Though analysts were disappointed the index did not reach the 55% level they had forecast it would, they remain generally optimistic the expansion will continue, noting the figure has climbed significantly from the low point of 32.9% it reached in December 2008. Twelve of the 18 manufacturing industries tracked by ISM reported growth in November, while five reported contraction and one remained unchanged.