MAPI Analysis on Industrial Production: ‘Fundamental Moderation in U.S. Factory Activity’
The following is an analysis from Cliff Waldman, Senior Economist for the Manufacturers Alliance for Productivity and Innovation (MAPI), regarding the industrial production report for May 2012:
“The May 2012 report on industrial production provides yet another clear signal that U.S. manufacturing growth is slowing as the factory sector confronts the adverse impacts of headwinds from both the domestic U.S. and global economies,” Waldman said. “Total industrial production fell by 0.1 percent after a strong 1 percent gain in April. But manufacturing production contracted by 0.4 percent, the second significant decline in three months. As was the case in March, the output contraction in May was broad based, with both durable and nondurable production registering declines. Nonmetallic mineral products, important links for a number of manufacturing supply chains, suffered a sharp 1.1 percent slide in output mostly due to a 1.6 percent decline in primary metals production and a near stall in fabricated metal products output.
“Somewhat alarmingly,” he added, “the machinery sector, which has been a critical catalyst for U.S. manufacturing since the recovery began in mid-2009, experienced a 0.5 percent contraction in May after a string of strong monthly gains.
“It was almost inevitable that the factory sector would slow after the unsustainable 9.8 percent growth seen in the first quarter of 2012,” Waldman noted. “But the May report from the Federal Reserve, along with other recent data, suggest a fundamental moderation in U.S. factory activity. The persistently sluggish U.S. economy, in addition to a portfolio of global troubles, from recession and turmoil in the Eurozone to a sharp slowing in emerging market economies, are making things difficult for domestic U.S. manufacturers. Most likely, the factory sector will continue to grow faster than the broad U.S. economy. Nonetheless, a U.S. manufacturing slowdown is in place and risks are on the downside.”