The U.S. manufacturing sector has entered a phase in which it is gathering speed. Unless something dramatic happens, we will enter 2018 with significantly more momentum than I expected a few months ago, and this has caused me to raise many of my forecasts for 2018.
That assessment comes after the release of the Census Bureau's Report on Manufacturers' Shipments, Inventories and Orders for September 2017. The data in this report confirms the trends in other manufacturing and plastics industry data on which I have reported in previous columns. Specifically, the growth rates for many of the plastics-intensive end markets are gradually accelerating in a positive direction.
According to this report, the dollar value of shipments of manufactured durable goods — this is the sector that includes electronics, appliances and automobiles — escalated 4.9 percent in September when compared with the same month last year. This followed a similar gain of 4.9 percent in August.
When compared with the monthly data from 2016, this category has experienced an increase in shipments every month this year and the pace of growth is accelerating. For the year to date, the shipments of manufactured durable goods are up 3.7 percent when compared with last year, and for the third quarter, the year-over-year growth rate is 4.6 percent. By comparison, the growth rate for total shipments of manufactured durable goods for all of 2016 was a negative 1.6 percent.
The pattern in the shipments data for manufactured nondurable goods — the biggest subset in this category is food products — is even more encouraging. The dollar value of shipments of these goods in September jumped 5.7 percent when compared with the year earlier. This came after a rise of 6 percent in August. The gain for the entire third quarter was 5.8 percent, and for the year to date, the total is up 6.6 percent. And here again this is a sharp contrast to 2016 when the annual growth rate was a negative 2.5 percent.
So let's take a step back and fully appreciate what this data is telling us. At this time last year, the manufacturing sector in general and the plastics industry in particular was going through a soft patch. The durable goods data from month to month was registering as many declines as gains, and the medium-term growth rates were clearly slowing. We did not go through an official recession, but it was certainly a period of consolidation in the manufacturing sector. As I have reported on several occasions, this was clearly evident in the overall data from the plastics industry.