Manufacturing Production Dips in January

Feb. 15, 2013
Decline in automobile output leads industrial retreat.

Manufacturing production fell 0.4% in January, the Federal Reserve reported today, after gains in November and December. But for the fourth quarter of 2012, the bank revised its manufacturing production estimate upward to 1.9%.

Leading declines in the January manufacturing results were motor vehicles and parts, which fell 3.2%, and primary metals, which fell 2.6%.

Overall, industrial production, which includes manufacturing, mining and utilities, edged down 0.1% in January. Production for the month was 2.1% higher than in January 2012. Capacity utilization decreased to 79.1% in January, a rate 1.1% below the nation’s average from 1972 to 2012.

Calling it a “disturbingly weak” performance, Cliff Waldman, senior economist for the Manufacturers Alliance for Productivity and Innovation (MAPI), said the “January weakness was fairly broad-based with durable goods manufacturing—which has been the prime catalyst for overall factory sector recovery—suffering a 0.5% contraction and nondurable goods manufacturing output falling by 0.3%.”

“Output in wood products, primary metals, and motor vehicles and parts, important indicators of the impact of key aspects of economic recovery on manufacturing, all suffered setbacks during January,” he noted. “A slip of 1% in chemicals output was the principal reason for nondurable goods weakness.”

“Today’s manufacturing data, which show a 0.37% month-to-month drop in real manufacturing output in January, show that American industry remains perilously close to entering its second technical recession in less than a year,” warned Alan Tonelson, an economist and research fellow at the U.S. Business and Industry Council.

While acknowledging the revised November and December gains in industrial production, Tonelson said the figures “continue a pattern of up and down readings registered by American manufacturing since its inflation-adjusted output ended a 7-month cumulative decline at the end of the year.”

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