US factory activity expanded in September 2013 at the fastest pace in 2.5 years, an encouraging sign that manufacturing could lift economic growth and hiring in the coming months.
The Institute for Supply Management, a trade group of purchasing managers, said Tuesday that its manufacturing index rose in September to 56.2, the highest since April 2011. That’s up from 55.7 in August and the fourth straight increase in the index. (A reading above 50 indicates growth.)
Manufacturers added jobs last month at the fastest pace in more than a year and ramped up production as well. They also received new orders at a healthy pace, though slower than in August.
U.S. factories are showing signs of picking up after slumping earlier this year. A modest recovery in housing and strong auto sales are pushing up demand for raw materials such as steel, aluminum and other metals, auto parts, furniture and appliances.
The economy expanded at a 2.5 percent annual pace in the April-June quarter, up from a 1.1 percent annual rate from January through March. Many economists believe growth slowed in the July-September quarter to a 2 percent pace or below. But the gains in manufacturing could set the stage for stronger growth in the October-December quarter.
Earlier this month, the Federal Reserve said manufacturers boosted their output in August by the most in eight years. The gains were driven by a robust month at auto plants. Speaking of the automobile market, aluminum plate, aluminum rod and bar and aluminum castings like those sold by Future Alloys have been replacing steel as the domestic carmakers strive to meet increasingly stringent federal fuel economy standards. In fact, aluminum use in cars is expected to nearly double by 2025!
Demand for so-called core capital goods rose 1.5 percent in September. Core capital goods are a good measure of businesses’ confidence in the economy and include items that point to expansion, such as machinery and computers.
In another sign of strength in the manufacturing sector, on October 8, 2013 Alcoa, the largest U.S. aluminum producer, reported better-than-forecast quarterly earnings after its smelting business returned to profitability and results improved at a unit that makes auto and aerospace parts. Alcoa reiterated its estimate that global aluminum demand will grow by 7 percent this year. Demand from the global aerospace industry is projected to grow as much as 10 percent and auto demand growth will be as much as 4 percent. This in turn will result in increased demand for Alcoa’s mill products divisions that produce 7075 T651 and 6061 T651 aluminum plate, aluminum rod and aluminum bar.