Manufacturing leads the way

Bob Moon Feb 15, 2012

Sometimes it seems Wall Street is never satisfied. Sure, U.S. factories boosted their output last month. And, December’s numbers were revised to reflect the best month of industrial growth since before the big meltdown. Problem is, those numbers still came in below expectations.

But the bottom line is still moving in the right direction.

Willy Shih is a management professor at the Harvard Business School. He points to an output gain of 1.5 percent in December and nearly .75 percent last month. Shih says auto sales played a big role. “I know sales out of Detroit were doing much better in January than many of us had expected, so I think that’s good news.”

Manufacturers are doing a good job keeping supply chains lean. “The cost of having the wrong or too much inventory is very high, so people are running things very lean now,” Shih says. Keeping the supply chain lean means being vulnerable to significant disruptions, such as the recent flooding in Thailand or the earthquake in Japan a year ago, but it’s also a sign of careful growth that’s paying off.

Shih warns that major uncertainties still exist: the eurozone’s sovereign debt crisis, the possibility that China’s growth is slowing and the likelihood of higher energy costs, to name a few.

Still, U.S. manufacturing’s comeback is starting to look like the real thing. With any luck, it’ll be strong enough to lead the economy out of the recession.

As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.

Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.

Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.