Where Does U.S. Manufacturing Really Stand?

The past year has produced some seemingly very positive data for the American manufacturing sector. Most notable has been the dramatic rise of the Dow Jones Industrial Average, a stock market index that tracks 30 major U.S. manufacturing companies, by more than 5,000 points over the course of 2017.

This considerable increase in industrial stock prices, though, may not be a definitive measure of U.S. manufacturing success. Several analysts have expressed concern that the stock market is overvalued, meaning that stock prices may not accurately reflect the success of American businesses. To create a comprehensive image of the state of U.S. manufacturing, it’s necessary to look at more relevant data tracking the sector’s performance.

Evaluating the Manufacturing Sector as a Whole

The first step in understanding where U.S. manufacturing stands is to look at the sector as a whole. Since employment growth is typically indicative of overall business growth, manufacturing employment statistics are a good place to start. In the last two months of 2017, American manufacturing firms added a total of 69,000 jobs. This growth continued into January and February of 2018, during which a total of 56,000 jobs were created, representing a slowdown in the fast-paced growth of industrial hiring.

Also reflecting strong, but possibly slowing, growth is the fact that demand for capital goods, those used to manufacture other products, fell slightly in December and January. With drops of 0.6 and 0.2 percent, respectively, capital goods demand in those two months indicated that a slowdown in manufacturing growth in the first quarter of 2018 could occur.

Despite signs of a slight slowdown in growth, forecasts indicate that the U.S. manufacturing industry as a whole will likely continue to grow throughout this year. Projections for the coming quarters estimate that manufacturing production growth will remain above 2 percent in all four quarters of 2018.

Which Specific Areas Are Strongest and Weakest?

Though the manufacturing sector of the American economy at large shows signs of slightly reduced but strong growth, individual industries will yield different results. For instance, a revitalized housing market is expected to boost manufacturing of construction materials and appliances, which together account for 5 percent of all American manufacturing output.

Also standing out as a potential high performer in the near future is the mining equipment industry. Though mining has been depressed since a commodity price collapse in 2015, industry experts expect a rebound of mine output over the next two years. Heightened demand for mining equipment has already benefited large manufacturers such as Illinois-based Caterpillar Inc.

Just as some sectors are set to top average growth, others appear poised to deliver below-average results. Of greatest concern is the American automotive manufacturing sector, which began shedding jobs in 2017. Automotive sales are expected to decline by as much as 5 percent in 2018, marking the end of several years of reliably strong sales. Given the historically large share of manufacturing GDP commanded by automakers, this downturn could be one of the more negative indicators for U.S. manufacturing as a whole.

Another manufacturing industry in the United States that could soon begin to lag behind the rest of the world is energy storage. Though America produces a large share of traditional lead-acid batteries, it is already starting to fall behind Asian countries in the area of manufacturing newer lithium-ion units. In addition to a lack of manufacturing capacity at the moment, this problem could be exacerbated in the future by a narrower availability of raw materials. Chinese companies have recently pursued aggressive acquisitions of mineral rights to cobalt and lithium, both crucial metals in the construction of modern lithium-ion batteries.

On the whole, the U.S. manufacturing market appears reasonably strong. Even with some lagging industries and a possible mild slowdown in growth, manufacturing in America is set to produce considerable success in the coming years.