PF Blog

Manufacturing Output Weaker in April

By: Bill Wood, MoldMaking Technology's Economics Editor
16. May 2013

For the third time in the past four months, the total monthly output of U.S. manufacturers declined. According to data released by the Federal Reserve Board this morning, total U.S. industrial production fell by 0.5% in April. The output for the manufacturing sector slipped 0.4%. This was the result of a drop of 0.6% in durable goods production and a decline of 0.1% in the production of nondurable goods. The bellwether motor vehicle segment declined 1.3%. So output from U.S. factories remains on a trend of gradual weakening. The manufacturing sector had been a source of growth in the overall U.S. GDP data in recent quarters, but it looks like it will be a drag on growth in the second quarter of this year.

The sluggishness in the manufacturing sector is not a total surprise. Foreign demand for U.S. exports remains soft, and most manufacturers have reduced inventory levels in anticipation of stalled consumer demand this summer. The good news is that export demand is not expected to fall much further and consumer spending will gradually increase as the year progresses. Thus, factory output will slowly ramp up in the second half of this year. A more rapid acceleration is in the forecast for 2014.

The two best indicators of future manufacturing activity in the U.S. continue to be the trends in the employment data and the residential construction data. The trend in U.S. housing starts is in a well-established recovery, and this will spur economic growth in all sectors of the economy. Economic analysis indicates that for every one dollar spent in the construction sector a total of six dollars of economic activity is generated. This will drive the employment figures higher, which in turn will result in a rise in household incomes and consumer spending. And that is the recipe for stronger factory output and increasing demand for new molds and tooling.

 

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