U.S. Outlook: Manufacturing leading the way lower
U.S. industrial production eked out a 0.1% gain last month after declining -0.4% in January.
While the rebound seems like a positive development, it was largely due to a one-time 3.7% winter weather jump in utilities output after two consecutive declines.
What really caught our attention was the 0.4% decline in manufacturing output, following a 0.5% drop the previous month. These are the first back-to-back declines in U.S. manufacturing production since the index dropped for three consecutive months beginning in July 2017.
For more on this, see highlights of my report below, followed by a link to the full U.S. Outlook, delivered on March 22.Key observations:
- Manufacturing output is now up just a modest 1.2% from a year ago.
- Only six of 18 major manufacturing sectors experienced positive growth in February, with computer and electronic products (+1.4%), wood products (+0.8%) and paper (+0.7%) expanding at the fastest rates.
- Industrial production growth from a year earlier reached a peak of 5.1% in the third quarter of 2018 and then moderated to 4.2% in the fourth quarter.
- We are forecasting industrial production of only 0.3% annualized in the first quarter of 2019 and by the end of 2019 industrial production growth from a year ago is expected to fall back to a modest 1.0%.