As U.S. economic growth continues to slow, U.S. manufacturing has slumped for its 2nd month in a row, missing out on major forecasts.
U.S. factory production fell by 0.4 percent after a revised 0.5 decrease in the prior month, Federal Reserve information indicated. Overall commercial production, including mines and energies, however, rose by 0.1 percent.
The reports on Friday extended the streak of weak economic information and underscored the Federal Reserve’s “patient” position towards additional interest rate increases this year. Fed authorities are scheduled to meet next Tuesday and Wednesday to assess the economy and ponder on the future course of monetary policy. The U.S. reserve bank raised rates four times in 2018.
Chris Rupkey, chief economist at MUFG in New York, explained, that the economy struggling to gain traction thanks to the ongoing U.S.-China trade war, persistent stock market turbulence and the government shutdown. Rupkey stated, “Thank God Fed officials were smart enough to take their foot off the rate hikes accelerator.”
February’s drop in manufacturing production joined reports ranging from retail sales to real estate in inferring the economy lost significant momentum early in the very first quarter.
The economy is slowing as the stimulus from 2018’s $1.5 trillion tax cut scheme fades. A trade war is also crimping activity in between the United States and China as well as by last year’s rise in the dollar and softening worldwide financial growth, which are hurting exports.
These elements, together with a 35-day partial shutdown of the U.S. government that ended on Jan. 25, have overflowed to the manufacturing sector.
In a different report released on Friday, the New York Fed said its primary service conditions index fell 5.1 points to a reading of 3.7 in February, the lowest since May 2017. It was the third successive month-to-month reading below 10, which the New York Fed implied “that growth has remained quite a bit slower so far this year than it was for most of 2018.”
A reading above zero shows growth in the region’s production sector. The survey’s new orders index fell 4.5 points to 3.0 in March. The weakness reported by the New York Fed also suggests that national factory activity stayed slow this month after slowing dramatically in February.
Total capability use for the commercial sector dipped to 78.2 percent from 78.3 percent in January, keeping inflation in check. Authorities at the Fed tend to take a look at capability usage steps for signals of how much “slack” remains in the economy– how far growth has room to run prior to it becomes inflationary.
Though economic slowdown is sending ripples through many sectors, some investors are suggesting that this could be the year of growth stocks, hinting that there may be opportunities for major profits after the global economy regains its momentum.