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A Look at February Factory Output

The February US Total Manufacturing Index (not seasonally adjusted) bounced back nicely from a disappointing January.  The January decline was the steepest since 2007, and the February rebound was the best since 2005.  A way to smooth out the sharp monthly movements is to look at the three-month moving average (3MMA).  The 3MMA has been experiencing an average seasonal decline off an October 2013 high.  The annual moving average (12MMA) has risen to the highest level in just over five years.

Our analysis portends ongoing rise in the manufacturing index in 2014, but don’t read too much into the strong February number.  A slower rate of rise is likely in the latter half of 2014 based on the input from the rates-of-change and our outlook for global growth later this year.

Manufacturing job growth is expected to increase.  Manufacturing Job Openings for the latest three months is 16.1% above the year-ago quarter, and the rates-of-change are improving.  Expect upward pressure on wages as skilled labor becomes even harder to find. 

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