American manufacturing is in danger of entering a recession

american flag manufacturing

  • Manufacturing activity fell during the first couple
    months of the year.
  • As growth slows and trade tensions drag on, the sector
    could be headed for a recession.
  • Manufacturing accounts for about 12% of the US
    economy.

Manufacturing activity in the US unexpectedly fell for a second
straight month in February, underscoring expectations for slower
growth across major economies and raising concerns that the sector
could be headed for a downturn.

Factory output fell 0.4% last month, Federal Reserve data
showed Friday, compared with expectations for a slight increase. In
January, manufacturing activity fell 0.5%.

“In other words, a broad-based softening is underway, and we’re
sticking to our view that the sector will be in recession through
mid-year,” said Ian Shepherdson, the chief economist at Pantheon
Macroeconomics.

From machinery to electronics, manufacturing output fell across
sectors in February. The decline was offset by an increase in
utilities and mining, bringing overall industrial production 0.1%
higher from a month earlier.

Motor-vehicle production was little changed after dropping a
steep 8.8% in January.

Because the manufacturing sector accounts for just over a tenth
of activity, Shepherdson said a short recession in the sector
wouldn’t bring the rest of the economy down with it. But it would
be a constraint on overall growth in both gross domestic product
and employment.

The American economy is expected to grow at a much slower pace
in coming months. Most economists forecast first-quarter GDP growth
to come in between 1% and 2%,
reflecting expectations of a broader slowdown across major
economies.

“The further decline in manufacturing output confirms that the
global industrial slowdown is now weighing more heavily on US
producers,” said Andrew Hunter, an economist at Capital
Economics.

That’s in part thanks to the fading effects of stimulus
measures, including a $1.5 trillion tax-cut package passed in the
US last year, but ongoing trade tensions haven’t helped.

A spate of tariffs between Washington and Beijing have raised
company costs, lowered access to foreign markets, and
disrupted supply chains
. Manufacturers across the US, including
carmakers,
warned
last year they could be hurt by the trade war that is in
its eighth month and counting.

“From the US perspective China remains a strategic manufacturing
partner, which enables US companies to substantially lower
manufacturing costs,” said James Ragan, director of wealth
management research at D.A. Davidson.

In 2015, American manufacturing was plunged into its
longest recession
since the financial crisis when a collapse in
oil prices and a strong dollar crimped output.

SEE ALSO: Dozens
of manufacturing companies testified about how Trump’s trade war
with China could affect them – here’s what they
said


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Source: FS – All – Economy – News
American manufacturing is in danger of entering a recession