U.S.Manufacturing Growth at13-year and 19-year Highs

Manufacturing activity in the United States rose in October 2003 to its highest level since January 2000, before the dotcom crash. The Institute for Supply Management (ISM, formerly National Association for Purchasing Management) said its combined measure of manufacturing activity hit 57.0 in October, up strongly from 53.7 posted for September. An index below 50 generally indicates contraction, while over 50 indicates growth or expansion. ISM survey committee chairman, Norbert Ore, said, "It appears that manufacturing will finish 2003 on a very positive note." The ISM's New Orders index component was even more impressive, hitting 64.3 in October, its highest level since June 1994. And the ISM's Export Index component hit 59.6, the highest it has been since September 1994. Manufacturing employment, however, continued to lag as manufacturers are finding ways to leverage productivity gains to limit hiring in advance of stronger recovery signals. The rate of distributor inventory sell-down slowed in October, to an index of 44.7 from 42.7 in September, indicating manufacturing distribution channels are now working to limit their exposure to stock-out conditions while remaining cautious about buying too early into an upswing. Separately, another indicator of manufacturing and trade activity -- ocean shipping rates -- continues to rise. The key indicator of dry commodity shipping rates, the Baltic Dry Index, has more than doubled in the past 60 days. Much of the pressure on shipping capacity is coming from China, both as an importer and exporter. China's increasing demand for raw materials has created a worldwide shortage of shipping cargo space, especially inbound. Heavier, smaller products -- such as ball and roller bearings, bushings and components -- are likely to see the largest financial impact from the shipping space shortage. Shipping analysts now predict prices of these types of products may be pushed up by as much as 3% to 4% in 2004, to compensate for higher shipping costs.