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IndustryNet Blog

Manufacturing output shrinks in January, but surges year-over-year

Posted by IndustryNet on Monday, February 18, 2019

100000342_teslashopfloorNew data released Friday by the Federal Reserve paints a gloomier picture for U.S. manufacturing at the start of 2019. According to the Fed, U.S. industrial output eased back in January, falling a half percent after posting its largest increase in ten months back in December of 2018.

However, a longer-term view shows the nation’s industrial output has in fact increased significantly across most sectors over the past year.

The Federal Reserve’s latest release on U.S. industrial production and capacity utilization showed overall industrial output sank a half percent, as a steep decline in motor vehicle production dragged down manufacturing output.

Manufacturing readings disappoint in January

The first month of 2019 marked a significantly lower output reading for manufacturing, which declined 1% overall in January. The decline in manufacturing output was led by a sharp decrease in motor vehicle production.

Taking a long-term view, however, manufacturing output has actually been on the rise, with total manufacturing output up 2.9% between January 2018 and January of this year.

Mining output on the rise

One bright spot in the Fed’s report was a 0.1% increase in mining output. This adds to a stunning year-over-year reading of 15.3% growth in mining output since January 2018.

Capacity utilization falls

Capacity utilization, which measures the extent to which industrial firms make use of their productive capacity, decreased 0.6% from its December reading, with firms now utilizing at a rate of 77%.

Taking a year-over-year view, however, total capacity utilization has actually grown fairly steadily over the past twelve months, with utilization up 2.2% from January 2018.

Manufacturing capacity utilization, specifically, fell 0.7% in January compared to December, but has also grown over the year, up 1.4% from January 2018.

Mining capacity utilization has grown the most over the year, and now stands at 94.8%, up 6.2% over the year.

industrial_production_jan18_jan19

Industrial output data by industry

Breaking down the manufacturing output data, durable goods manufacturing declined 1.7% in January after rising 1.3% in December, while non-durable goods manufacturing inched down 0.1%.

Year-to-year, durable goods manufacturing output actually rose 3.1%, while output in non-durable goods manufacturing rose 2.4%.

In January, the motor vehicles and parts industry led losses in production, down 8.8%. Other sub-sectors showing a decline in output included electrical equipment (-2.1%); wood products (-1.7%); and computer and electronic products (-1.4%). All other industries subsectors were largely unchanged.

Year-over-year, just three industries posted losses: apparel and leather (-7.9%) printing/related support activities (-3.2%); and textile mills (-3.1%).

Looking at gains over the year, primary metals output was neck-in-neck with aerospace production, with those sectors rising 6.7% and 6.8%, respectively.

Primary metals, in recent history not much of a growing sector has seen output rise consistently. This points to an increase in domestic metals production, possibly in response to tariffs on imported steel and other primary metals.

Related: USTR finalizes tariffs on half of all Chinese imports

Other year-over-year gains include fabricated metals products (+5.4%); machinery (5.1%); chemicals (+4.8%) computer/electronic products (4.3%) and furniture/related products (4.1%)

Other industries increasing in output included nonmetallic mineral products (+2.8%); wood products (+1.8%); aerospace and miscellaneous transportation equipment (+1.7%); and computer/electronic products (+1.3%).

U.S. manufacturing still in growth mode

Overall, U.S. manufacturing has been in expansion mode for nearly two years. Recent reports, however, indicate mixed signals for the sector, with the ISM’s January report showing a 2.3% rise in manufacturing activity – including a 6.4% surge in production – while the Fed’s report shows a contraction in manufacturing output.

Adding to this is the Labor Department’s stellar jobs report, which showed the U.S. manufacturing sector added 13,000 new jobs in January, as well as a record number of manufacturing jobs in 2018.

Taking the longer-term view shows a U.S. manufacturing sector that appears to still be in expansion, with significant gains shown in output, production, employment, and new orders according to both the ISM and the Fed’s measurements. happy manufacturing techworker

Recent data collected by IndustryNet also points to industrial growth in January, with the states of Oregon and Virginia posting significant gains in manufacturing jobs. A number of new plant openings were announced over the month as well.

With a lot of factors coming into play, including increased tariffs, the establishment of the new USMCA trade deal, and the recent government shutdown, it remains to be seen whether the U.S. industrial sector will keep up its current momentum.

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IndustryNet is also a direct path for U.S manufacturers to increase their visibility among domestic industrial procurers.

 

 

 

 

 

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