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US manufacturing sinks again in February: Fed
WASHINGTON, March 16, 2019 (BSS/AFP) – US manufacturing dropped sharply
for the second consecutive month in February with across-the-board declines
in nearly every category of product, the Federal Reserve reported Friday.
The decline kept overall industrial production from rebounding as analysts
had forecast, despite a surge in the volatile utilities component.
The weakness, which many economists say will continue this year, is a blow
to President Donald Trump’s aggressive trade policies which have been focused
on boosting American manufacturing, even as it makes up a dwindling share of
the US economy.
And economists attribute some of the weakness to the slowdown underway in
China, in part the result of Trump’s trade war with the world’s second
largest economy.
Total industrial output eked out a gain of 0.1 percent, after falling 0.4
percent in January — slightly better than originally reported — helped by
the 3.7 percent surge in utilities, according to the monthly report.
But manufacturing fell 0.4 percent after a 0.5 percent decline in the
prior month, even though January’s decline was an improvement on the 0.9
percent drop originally reported.
Within the manufacturing sector, the negatives were widespread, including
losses of about 2 percent for nonmetallic mineral products and machinery.
“Manufacturing is succumbing to China’s gravitational pull,” said Ian
Shepherdson of Pantheon Macroeconomics.
He said “a broad-based softening is underway, and we’re sticking to our
view that the sector will be in recession through mid-year.”
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– ‘Into the mire’ –
However, manufacturing accounts for only 12 percent of GDP, “so a short
and relatively mild downturn in the sector is not going to pull the rest of
the economy into the mire, but it will be a constraint on overall growth in
both GDP and employment,” Shepherdson said in a research note.
Output of motor vehicles and parts saw just a small dip, which was good
news after the 7.6 percent drop in January, while computers and electronic
products gained more than 1 percent.
The drop in motor vehicle production was essentially cancelled out by the
gain in parts output. But excluding those two, total output was down 0.2
percent, according to the report.
Mining output, which includes oil and natural gas, rose 0.3 percent for
the second month in a row, marking the 13th consecutive monthly increase.
Total industrial production remains 3.5 percent above February 2018, while
manufacturing is up 1 percent.
With the tepid output, total industrial capacity in use dipped for the
third consecutive month to 78.2 percent.
Mickey Levy of Berenberg Capital Markets notes that US output continues to
perform better than other advanced economies.
But as global demand softens, he cautioned, “How long will US resilience
last as the industrial slump spreads through other advanced economies and key
trading partners?”
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