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Has the US manufacturing sector’s growth already started its cyclical descent?

I am going to call a top here however. If you look back at the historical data, there have been no readings higher than this in nearly three decades. The last ISM number higher than 61.4% was a monster 69.9% reading from December 1983. So what does that mean going forward. In terms of growth of the manufacturing sector, it means that we are hitting maximum growth. I would expect the manufacturing sector to add less to overall GDP going forward.

-Manufacturing still firing on all cylinders, 1 March 2011

The April 2011 Manufacturing ISM Report On Business came out today and confirmed the slight downward path we have seen since I wrote that paragraph two months ago. Mind you, 60.4% is still a very robust reading. Nevertheless, I still believe the manufacturing sector’s contribution to overall GDP growth has peaked.

Watch out for inflation though. Costs are poised to feed through in a demand destroying way.

ISM April 2011

Source: April 2011 Manufacturing ISM Report On Business┬« – ISM

About 

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.

3 Comments

  1. Virgil0211 says:

    ‘Watch out for inflation though. Costs are poised to feed through in a demand destroying way.’

    Does that mean that now would be a good time to change my investments to include more gold and alternative currency not backed by American dollars?

    If I keep some money in stocks and bonds, how would you recommend it be distributed?

    (Keep in mind that I’m still a bit of an amateur. I may be an honor student, but I haven’t gotten my bachelors in econ yet, so I may not be as familiar with things as I should. Blame the Texas in-state funding limit on credit hours forcing me to finish my Criminal Justice degree before I get a degree in economics. *Grumble, grumble*)

    • Virgil, sorry but all data and information provided on this site is for informational purposes only. Creditwritedowns.com is not a financial advisor, and does not recommend the purchase of any stock or advise on the suitability of any trade or investment. I think Casey Research does a good job in making the case for gold, however. It is something to consider.

    • Anonymous says:

      What it means is that while prices are still going up by more than 5% the CPI and RPI figures miss out the items that have the biggest impact on spending power. Wages have been stagnant or even fall for many yet rising inflation has taken a slice of what is left after taxes. It is this respect that Edward is saying that it destroying demand. One supermarket estimates that disposable incomes are at least 5% lower this year. That means no matter what people want to buy they do not have the funds for it.

  2. Virgil0211 says:

    ‘Watch out for inflation though. Costs are poised to feed through in a demand destroying way.’

    Does that mean that now would be a good time to change my investments to include more gold and alternative currency not backed by American dollars?

    If I keep some money in stocks and bonds, how would you recommend it be distributed?

    (Keep in mind that I’m still a bit of an amateur. I may be an honor student, but I haven’t gotten my bachelors in econ yet, so I may not be as familiar with things as I should. Blame the Texas in-state funding limit on credit hours forcing me to finish my Criminal Justice degree before I get a degree in economics. *Grumble, grumble*)

    • Virgil, sorry but all data and information provided on this site is for informational purposes only. Creditwritedowns.com is not a financial advisor, and does not recommend the purchase of any stock or advise on the suitability of any trade or investment. I think Casey Research does a good job in making the case for gold, however. It is something to consider.

    • DavidLazarusUK says:

      What it means is that while prices are still going up by more than 5% the CPI and RPI figures miss out the items that have the biggest impact on spending power. Wages have been stagnant or even fall for many yet rising inflation has taken a slice of what is left after taxes. It is this respect that Edward is saying that it destroying demand. One supermarket estimates that disposable incomes are at least 5% lower this year. That means no matter what people want to buy they do not have the funds for it.