MAPI Analysis: Industrial Production Rebounds
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 April 2012:
“The Federal Reserve reported that industrial production enjoyed a strong 1.1 percent gain in April after falling by 0.6 percent in March. For manufacturing, the 0.6 percent output gain in April was just about the mirror image of the 0.5 percent contraction in March,” noted Waldman. “Such a pattern suggests that seasonal distortions from one of the warmest winters of the past century are still wreaking havoc with many economic data series. Nonetheless, the April report reinforces what is generally known about the composition and strength of the factory sector rebound. The snapback in manufacturing output was more than entirely accounted for by an impressive overall performance in durable goods, which has been the primary source of output and employment strength for U.S. manufacturing throughout the current recovery. Durable goods output growth advanced by a strong 1.3 percent in April, far more than compensating for the 0.3 percent contraction during the previous month.
“For some durable goods sectors, such as electrical equipment and aerospace, the gain in April was essentially the mirror image of the fall in March,” Waldman added. “But other data, distorted as they may be by seasonal issues, suggest a moderation in overall manufacturing activity. Primary metals, a key supplier of many goods-producing sectors, only saw a 0.1 percent gain in April after a steep 2.5 percent contraction in March. The machinery sector experienced production gains in both March and April but slowed considerably in the latter month. The nondurables sector experienced an overall decline in output during April, continuing to be weighed down by uneven consumer activity.
“Manufacturing output growth is slowing from the outsized gains seen during the first quarter of 2012,” he concluded. “The risks for near-term factory sector prospects are clearly on the downside. The recession and instability risks from the troubled Eurozone, weakness in much of the industrialized world, and sharply slowing growth in emerging markets are conspiring with moderating business investment in the U.S. to create headwinds for U.S. manufacturing growth.”