Assessing all I've seen and heard over the past year leads me to one conclusion—2004 is the year we've all been waiting for, economically, since the manufacturing industry began to decline in 2001. Looking at the numbers broadly, U.S. manufacturers' after-tax profits reached $82.4 billion in second-quarter 2004 (the most recent quarter for which data is available)—a level higher than any attained even in 2000 (the highest level reached that year was $77.4 billion in the first quarter), according to the U.S. Bureau of the Census. That's a huge jump from the $7.8 billion low in after-tax profits, fourth-quarter 2001. Census Bureau numbers aren't the only ones pointing out that 2004 has been very, very good to manufacturing. The Institute for Supply Management's (ISM) Purchasing Managers Index (PMI) stood at 56.8 in November. This rate, issued on Nov. 1 for October 2004, represents the 17^th consecutive month of economic growth in the manufacturing sector. Any number higher than 50 on this index indicates expansion in the U.S. industrial sector. Other numbers in ISM's business survey show continued growth in manufacturing employment (54.8), production (58.9), and new export orders (56.6). Concern had been expressed by some that increasing inventories over the past year could lead to problems in the near future, with supply overriding demand; however, manufacturers' inventories are contracting (48.2) while customer inventories are seen as "too low" (43.5), which could signal a near-term ramp-up in production to stabilize the situation.

Expansion in the manufacturing sector can also be seen in indicators tracked by the Federal Reserve. For third-quarter 2004, total industrial production increased at an annual rate of 2.9%, and manufacturing output rose at a 4.4% rate. Capacity utilization for total industry stood at 77.2%—2.3 percentage points above its 2003 level. Furthermore, U.S. Bureau of Economic Analysis data shows that domestic industrial equipment capital spending has been increasingly steadily during the year, after severe cut backs following the downturn of 2001-2002.

Major public companies in the controls and automation space also fared well this year. According to an FTN Midwest Securities Corp. second-quarter 2004 report, Rockwell Automation's control sales grew 13%, Emerson Process Controls base sales grew 7%, Baldor Electric sales grew 18%, Siemens Automation and Drives' sales grew 7%, and Groupe Schneider sales base increased 10%.

Control Engineering subscribers are also reporting a sense of optimism. In an online survey conducted in late August/early September 2004, 56% of respondents noted improvement in their perception of the engineering job market in the U.S.

Personally, I'm bullish on 2005 being an even better year for the industry and our readers. Have a great holiday season.

David Greenfield, Editorial Director

dgreenfield@reedbusiness.com