Factory production edged up in February by 0.1% after a revised down 0.3% fall in January. The numbers still fell short of analysts’ 0.2% predicted rise.
Despite the slight gain, the report from the Federal Reserve showed manufacturing production dropped 0.2% while the mining industry fell by 2.5%. Both losses were offset by a 7.3% surge in utilities driven by the deep freeze that hit the east in February’s second half.
“Manufacturing’s decline was widespread last month,” explained Daniel J. Meckstroth, chief economist for the MAPI Foundation. “Production was down in 13 of the 20 major industries and unchanged in one. There was strong growth in aerospace and petroleum refining but a major loss of production in primary metals and a severe decline in motor vehicles and parts. The motor vehicle industry’s production surged 6% in November 2014 and auto industry production has been giving back that production ever since. Motor vehicles and parts production fell 3% in February; without this industry, manufacturing production would have been flat last month, rather than showing a decline of 0.2%.
On the positive side, manufacturing production has increased 3.4 percent over the past 12 months. While this was a steep decline from the 4.9 percent year-over-year pace observed in January, it still represents a modest rate of growth overall." - Chad Moutray, NAM chief economist
It’s the third straight month manufacturing has declined, and Meckstroth notes, “This is partly explained by the unwinding of November’s surge in motor vehicle production and the West Coast port work slowdown that stranded material on container ships. The severe winter further disrupted transportation and work schedules. We saw this pattern last year and remain optimistic that production will come roaring back in the spring and summer.
As for when a pick-up in manufacturing might be realized, IHS economist Michael Montgomery says the chances of a quick upturn are slim, “Consumers can go on a March binge if they choose to and spur a spring revival in manufacturing, or at least some token improvement from its lackluster past few months, but this malaise will be deferred until summer unless they got or get on the ball in March. The drag from foreign trade which was caused by the strong dollar will continue to weigh on manufacturing, and inventory building will not pick up until sales do and the consumer sector is the sole place where that is likely to happen.”
On the positive side, manufacturing production has increased 3.4% over the past 12 months. While this was a steep decline from the 4.9% year-over-year pace observed in January, it still represents a modest rate of growth overall." - Chad Moutray, NAM chief economist
The news isn’t all downbeat, according to NAM chief economist Chad Moutray, “On the positive side, manufacturing production has increased 3.4% over the past 12 months. While this was a steep decline from the 4.9% year-over-year pace observed in January, it still represents a modest rate of growth overall. In addition, at least part of that deceleration could be explained by the very strong rebound in production seen in February 2014 after weather-related issues the month before.
A deeper look at the numbers shows output of nondurable goods was up 0.2% in February. Petroleum and coal products added 1.9%, aerospace and other transportation equipment jumped 1.2% and textile and product mills were up 1.1%. Chemicals and computer and electronic products were also up for the month.
Follow this link to see the full Industrial Production report for February from the Federal Reserve.
