According to a Reuters
report, the USA’s manufacturing output was unchanged in March after two consecutive monthly declines, resulting in the first quarterly drop in production since Donald Trump became president.
The weakness in manufacturing reported by the Federal Reserve is ‘in tandem’ with a moderation in the broader economy and is despite the White House’s ‘America First’ policies — including trade tariffs aimed at protecting domestic factories.
Chris Rupkey, chief economist at MUFG in New York, said: “Manufacturing production has pivoted to the downside in the first quarter of the year, showing that the revival in factories and output is sputtering for the first time since
the Trump economics team took office.
The trade war (with China) and America First policies have not brought factories back home yet.”
Economists polled by Reuters
had forecast manufacturing production edging up 0.1% in March, but manufacturing output that month was restrained by weak motor vehicle and wood products production, after falling by 0.3% in February.
Production at factories fell at a 1.1% annualised rate in the first quarter; this was the first quarterly drop since the third quarter of 2017 and followed a 1.7% increase in the October-December period.
That said, US financial markets seemed little moved by the data. Motor vehicle and parts production fell by 2.5% in March, after increasing by 2.3% in February, an ‘inventory overhang’ in the automotive sector weighing on production.
Furthermore, factory employment declined in March for the first time since July 2017.
Excluding motor vehicles and parts, manufacturing output rose by 0.2% in March, lifted by increases in the production of primary metals, along with computer and electronic products, after falling by 0.5% in February.
Daniel Silver, an economist at JPMorgan in New York, said: “We think we could be moving past the worst of the recent soft patch for the manufacturing sector, although the evidence of this improvement has not been overwhelmingly clear.”
While manufacturing is struggling, there are signs of green shoots in the housing market after activity contracted last year.
This market is getting a ‘lift’ from a fall in mortgage rates after they surged last year, but housing accounts for a small fraction of the economy, so this recovery in activity is unlikely to have a huge impact on gross domestic product.