US factory output was already riding high this year as the economy continues to grow, but due to the disruptions in supply chains because of subsequent hurricanes Harvey and Irma, the manufacturing activity is now at its highest point in 13 years.
The Institute for Supply Management said the manufacturing index jumped to 60.8 in September from 58.8 the month before. Any reading above 50 means the manufacturing department of the economy is expanding.
The hurricanes hitting the southern part of the US means factories will probably need longer to deliver goods and thus raw material prices are going up, which in return ups the price of finished products, and so on…
John Ryding, chief economist at RDQ Economics in New York, commented: “Much of the gain is presumably linked to the aftereffects of the hurricanes. Nonetheless, manufacturing growth is strong.”
Furthermore, factories are also continuing to hire as the measure of factory employment could be seen hitting the highest level since 2011. All good news then.
The economic forecast for the US was also strengthened with other data showing an expansion of construction spending in August.
Government reporting said hurricanes Harvey and Irma did not appear to have impacted construction spending data as the responses from the Texas and Florida areas affected by the storms were "not significantly lower than normal."
According to the Commerce Department, the states of Texas and Florida accounted for a 15 percent part of US construction spending in 2016.
Conclusion so far is that the US economy grew more than 3% in the spring and is on track to finish 2017 on a very positive note, despite being hit by two major hurricanes.
Every key segment of the economy is expanding and companies are looking to fill a record number of job openings. However, manufacturers have a hard time finding enough skilled workers to fill those positions. A transportation equipment executive commented: “Labor shortages continue to haunt operational capacity”.
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