US Manufacturing Production Unexpectedly Shrinks in February

US Manufacturing Production Unexpectedly Shrinks in February

A separate report earlier Friday showed the New York Fed’s measure of general business conditions fell to the lowest since May 2017.

U.S. factory production slumped for a second month in February, missing forecasts for a pickup, indicating headwinds from the trade war to slower global growth are weighing on manufacturers. Still, the prior month’s drop was revised up.

Manufacturing output fell 0.4% after a revised 0.5% decline in the prior month, Federal Reserve data showed Friday. The results missed the estimate for a 0.1% rise in a Bloomberg survey. Total industrial production, which also includes mines and utilities, rose 0.1% after a revised 0.4% decrease that was also upwardly revised.

Key Insights

The results indicate headwinds for manufacturing persist as producers confront uncertainty from trade policy and dimmer projections for major economies from China to Europe. Economists project the U.S. economy will slow in each quarter this year.

The data echo other downbeat reports on the sector. The Institute for Supply Management’s gauge of U.S. factories fell to a two-year low in February in a broad decline across orders, employment, production and deliveries.

A separate report earlier Friday showed the New York Fed’s measure of general business conditions fell to the lowest since May 2017. The report showed mixed results across market groups, with increases for materials, business supplies, and defense and space equipment, along with decreases for consumer goods, business equipment and construction supplies. Production of motor vehicles and parts decreased 0.1%.

Capacity Utilization Edges Down

Capacity utilization, measuring the amount of a plant that is in use, edged down to 78.2% from 78.3%.

Utility output rose 3.7% after declining 0.9% the prior month. Mining production rose 0.3% for the second straight month. Machinery production slipped 1.9%, while output of consumer goods was down 0.1%, and business-equipment production fell 1%.

The Fed’s monthly data are volatile and often revised. Manufacturing, which makes up about 75% of total industrial production, accounts for about 12% of the U.S. economy.

By Jeff Kearns

TAGS: Operations
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