U.S. Manufacturing Production Declined in September--Update
18 October 2019 - 4:18AM
Dow Jones News
By Sarah Chaney and Amara Omeokwe
WASHINGTON -- U.S. manufacturing production fell in September,
adding to evidence that slowing global growth and trade frictions
are weighing on the economy.
Manufacturing output, the biggest component of industrial
production, fell 0.5% in September from a month earlier, the
Federal Reserve said Thursday. Production at factories was in part
dragged down by a strike at General Motors, but showed broad-based
fragility.
Overall industrial production, which includes output at
factories, mines and utilities, dropped 0.4% in September and
declined 0.1% from a year earlier, the first year-over-year
decrease since 2016. Mining production pulled back, helping further
drag down demand for manufactured parts
Weakness in the U.S. economy this year has largely been
contained to manufacturing and business investment, but signs
suggest the slowdown could be spreading. Employers are still
hiring, albeit at a slower pace than in 2018. Consumer spending has
been solid, but data released earlier this week showed September
was a soft month for retailers.
"The risk is that the longer the weakness in the industrial
complex remains in place, the greater the risk that this diffusion
takes hold across other sectors," said Gregory Daco, chief U.S.
economist at Oxford Economics.
On Thursday, the Commerce Department reported home building fell
in September. After the figures were released, forecasting firm
Macroeconomic Advisers kept its estimate of third-quarter gross
domestic product growth at a 1.3% annual rate, down from a 2%
annual pace in the second quarter.
Still, the U.S. economy is in growth mode.
"We have a situation where consumers generally are doing pretty
well," Gus Faucher, chief economist at PNC Financial Services
Group, said.
Federal Reserve policy makers cut interest rates this year with
the goal of cushioning the economy against a slowdown in
manufacturing and global growth. They will meet later this month,
and a rate cut is seen on the table.
National Economic Council Director Larry Kudlow said Thursday
the economy has faced difficulties over the past year, including
"very severe Fed tightening" in 2018, as well as slower global
growth and geopolitical tensions, such as Brexit.
"We're still plugging along," he said. "I'm kind of
optimistic."
The U.S. is a service-oriented economy, meaning manufacturing
accounts for a small share of gross domestic product. But the
manufacturing sector is highly sensitive to swings in global
demand, making it an important indicator of broader economic
shifts.
The loss of momentum in U.S. manufacturing aligns with weakening
factory output overseas.
The manufacturing output index in Germany, a key export economy
in the eurozone, fell to 101.5 in August from 105.8 a year earlier,
Organization for Economic Cooperation and Development figures
showed.
Surveys of purchasing managers across the globe pointed to
deepening declines in factory activity in September. The U.S. was
not immune. The Institute for Supply Management's survey of
supply-chain managers showed manufacturing activity contracted for
the second straight month to its lowest level since 2009.
A faltering manufacturing sector world-wide is squeezing broader
economic expansion. Global growth is expected to fall to 3% this
year, according to new estimates from the International Monetary
Fund, down from an estimate of 3.2% in July and a 3.8% pace as
recently as 2017. The IMF attributed the sharp slowdown over the
past two years primarily to rising trade barriers that have stunted
manufacturing and investment around the world.
Kate Davidson contributed to this article.
Write to Sarah Chaney at sarah.chaney@wsj.com and Amara Omeokwe
at amara.omeokwe@wsj.com
(END) Dow Jones Newswires
October 17, 2019 13:03 ET (17:03 GMT)
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