Manufacturing still a bright spot in dark economy

Published: November 18, 2011 6:00 am ET

Manufacturing remains the one bright spot in an economic time that’s tumultuous — an agonizingly slow U.S. recovery from the Great Recession and the spreading fears of a eurozone crisis.

Statistics bear that out. The Institute for Supply Management shows the manufacturing sector expanded for the 27th consecutive month in October. That month, ISM’s widely watched Purchasing Managers Index was 50.8 percent; a reading over 50 percent indicates manufacturing is expanding.

The overall U.S. economy is expanding too, it just doesn’t feel like it.

But as this week’s Machinery Outlook report shows, America’s plastics factories are investing in equipment. Bill Bregar, Plastics News’ machinery-beat reporter, talked to 45 machinery company executives and two plastics economists. It’s upbeat reading.

Plastics processors are modernizing for the future. Economists have noticed the capital spending, as you read headlines saying that manufacturing is “leading the economy out of a recession.”

That’s a bit overblown, since manufacturing is only about 11 percent of U.S. gross domestic product. But we think that manufacturing is poised — finally — to get some respect from the American public and government officials.

People instinctively realize that we have to make things in this country. They give it lip service. But now manufacturing is front and center as a beacon in a spate of daily negative economic news.

“In my whole career I’ve never seen a disconnect as big as this. The signals you see in the macroeconomics is totally the opposite of — 180 degrees from — the view in the manufacturing side of it,” said Mark Sankovitch, president of Engel Machinery Inc. Other executives echoed that remark in our outlook stories.

Now that America is paying attention, it’s time for the plastics industry to lobby hard to extend the 100 percent accelerated depreciation for capital purchases, set to run out Dec. 31. That’s set to decrease to 50 percent depreciation for equipment put in place in 2012. Keeping the full 100 percent, first-year expensing would keep the ball rolling — encouraging manufacturers to keep upgrading.

At this point it’s largely anecdotal, but some plastics work is moving back to the United States from China, as the cost of doing business in China goes up. As this happens, U.S. industry has to be ready.

Of course, the bigger challenge is reviving the broad U.S. economy. Modern, automated factories don’t need as many people. But the ones they do hire must have skills and a good attitude. How to educate and motivate young people for the new factory jobs should be one of America’s most important priorities.

And in America, it’s time to change from a nation valued only as a “consumer” to one that produces goods.

“We got to be all about consumption in this country, and on borrowed money,” said economist Bill Wood. “Once we get the idea that we’ve got to vigorously invest in the future — and stop thinking of ourselves as consumers on a binge — the manufacturing sector is poised for tremendous growth. That’s really our only path to salvation.”

America has had enough of credit default swaps and other financial instruments invented by the Wall Street crowd. It’s time to mold some parts out of plastic!


Manufacturing still a bright spot in dark economy

Published: November 18, 2011 6:00 am ET

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