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ISM report: U.S. manufacturing shows positive growth heading into 2013

The new year is looking up for Wall Street and American manufacturing.

We spoke about manufacturing’s positive outlook in the U.S. in a few recent posts, but now the most recent numbers are in from the Institute for Supply Management (ISM). The report: U.S. manufacturing grew in December along with factory hirings, both indications of sustainable growth for 2013.

Major news outlets like Bloomberg and The New York Times jumped on the report and observed a general sense of optimism among American industry leaders.

Positive numbers

Here are some of the statistical highlights from Bloomberg‘s writeup:

  • Manufacturing activity index rose to 50.7, up from 49.5 in November. (Anything above 50 signals growth.)
  • The S&P 500 advanced 2.5%, its largest gain in more than a year.
  • A measure of employment increased to 52.7, up from 48.4 in November.

“We can take away a lot of positives from the December report,” Bradley Holcomb, chairman of the ISM factory survey, said on a conference call with reporters and quoted in Bloomberg.

It should be noted that the ISM’s encouraging report comes despite the recent fiscal deadlock in Washington and was completed before Congress came to an agreement on Tuesday. U.S. manufacturing seems determined to grow despite a multitude of extenuating circumstances.

Ahead of the curve

What the media’s coverage of ISM’s report failed to provide was the context of European manufacturing’s situation. The Wall Street Journal reported yesterday that European manufacturers continued to shrink in December, part of Europe’s general economic bottoming out that’s been affecting all 17 euro-zone nations for most of 2012.

As any econ guru will tell you, the European economy is important because it drives American exports and, therefore, much of America’s industrial manufacturing. But ISM’s report is careful to indicate that the improvement in U.S. manufacturing activity is likely due in part to a recovering housing market, which means we’re improving internally without the added benefit of growing European exports. Add that to China — the second largest economy in the world — and their recent, surprising expansion and suddenly the U.S. appears very much ahead of the curve.

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