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IndustryNet Blog

U.S. industrial output climbs, but manufacturing sputters

Posted by IndustryNet on Monday, March 18, 2019

100000357_metalfabricationNew data released Friday by the Federal Reserve paints a more optimistic picture for U.S. industry. According to the Fed, U.S. industrial output edged up back in February, after falling a half percent at the start of the year.

However, when measured on its own, manufacturing output actually declined, albeit to a lesser degree than January (down a half percent, as opposed to January’s one percent).

Taking a longer-term view, it should be noted that manufacturing 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 inched up 0.1%, led by utilities and mining, while manufacturing output fell a 0.4 percent.

Here's what the uptick in industrial production looks like, measured over ten years:


Manufacturing output slides again in February, but up over year

The first month of 2019 marked a significantly lower output reading for manufacturing, which has declined 1.4% since the beginning of the year. The decline in manufacturing output was led by non-metallic mineral products; and machinery; furniture & related products. decrease in motor vehicle production.

Taking a long-term view, however, manufacturing output has actually been on the rise, with total manufacturing output up 1% February 2018-2019.

Here's the ten-year view of manufacturing output, based on Federal Reserve data:


Industrial production overall has risen 3.5% year-to-year, with mining up 12.5% and utilities up 9%.

Capacity utilization falls

Capacity utilization, which measures the extent to which industrial firms make use of their productive capacity, inched down 0.1% from its January reading, with firms now utilizing at a rate of 78.2%.

Taking a year-over-year view, total capacity utilization increased at a steady clip over the past twelve months, with utilization up 2.2% from February 2018.

Broken down by sector, manufacturing capacity utilization declined 0.4% in February, while mining decreased one third of one percent, and utility utilization climbed 2.7%.

Industrial output data by sub-sector

Breaking down manufacturing output data, durable goods manufacturing declined 0.4% in February, but rose 2.4% year-over-year. Non-durable goods manufacturing inched down 0.1%. Year-to-year durable goods manufacturing output fared slightly worse over the month, down 0.7%; and was unchanged year-over-year.

In February, the petroleum and coal products led losses in non-durable manufacturing, down 5.2%, followed by apparel & leather (-1.8%) and printing/related support activities (-1.5%).

A 2.1% decline in non-metallic mineral products dragged down durable manufacturing output, followed by machinery (-1.9%) and furniture (1.5%). These were balanced out by notable increases in computer & electronic products (+1.4%) and transportation equipment (+1.1%).

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

Related: USTR finalizes tariffs on half of all Chinese imports

Year-over-year gains included aerospace and miscellaneous transportation equipment (+8.1%); computer & electronic products (+5.6%) and fabricated metal products (3.5%).

Where is U.S. manufacturing headed?

Overall, U.S. manufacturing is still expanding. According to the Institute for Supply Management, February stands as the 36th consecutive month of growth in the U.S. manufacturing sector, and the 118th straight month of growth in the economy overall.

Recent reports, however, indicate mixed signals for the sector, with the ISM’s February report showing a 2.4% decline in U.S. manufacturing activity. Although the sector is still growing, it is expanding at a slower rate than before.

Read more: U.S. manufacturing activity cools in February

Adding to this is a weak labor report, which shows the U.S. manufacturing sector has added 4,000 jobs in February, compared to the 22,000 the industry has been averaging each month for the past year, culminating in a record number of manufacturing jobs added in 2018.00000139HighTechManufacturing

It also doesn’t help that the U.S. trade deficit hit a record high in February, although it’s unclear how much of an impact trade deficits really have. More on that in this post.

Taking the longer-term view, however, the U.S. manufacturing sector appears to be in good shape. The sector has achiever significant gains in output, production, employment, and new orders according to both the ISM and the Fed’s measurements.

Recent data collected by IndustryNet also points to industrial growth in February, with the states of Maine and Rhode Island posting significant gains in manufacturing jobs, as well as the U.S. hydraulics sector.

With a lot of factors coming into play, including increased tariffs, the establishment of the new USMCA trade deal, and January’s 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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