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March Manufacturing Numbers in Key Regions a Welcome Surprise; Latin Trade Deserves an Assist?

Given the unstable situation in the European Union and the importance of the region to manufacturing in the United States, especially in the Northeast, recent statistics out of a couple of monthly bellwether studies have to be viewed as a victory—and a bit of an upset at that.

Index results for the recent period from the Federal Reserve Banks of New York and Philadelphia showed surprise increases. New York increased to a level of 20.51 in March from the previous 19.53, while Philadelphia's uptick brought a February 10.2 reading up to 12.5. Both indices exemplified, not to mention foreshadowed, an unexpected mid-2011 manufacturing swoon after the sector had so noticeably carried economic growth pretty much from the end of the recession until said point.

"There also is a very large population affected by the reports, as these are some of the most densely populated cities in the nation. If there is progress in this region, it suggests that manufacturers are seeing gains across a wide variety of consumer sectors," said NACM Economist Chris Kuehl, PhD. "Additionally, growth here is likely to make a more significant dent in the unemployment rate than growth in the energy regions such as the Dakotas."

Kuehl speculated that a big part of the increased gains in manufacturing activity (e.g., now four consecutive months in New York) is increased sales to newer international markets, largely in Latin America. Doing this has, in his estimation, made U.S. exporters less vulnerable to European instability. "There has been some improvement in the prospects for the euro zone, but not enough to bolster the manufacturing sector that much. The fact is that companies in this region have broadened their markets considerably in the last year, and that is starting to pay off," he said.

Brian Shappell, NACM staff writer